Preamble

The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.

Private Bills [Lords] (Standing Orders not previously inquired into complied with),

Mr. SPEAKER laid upon the Table Report from one of the Examiners of Petitions for Private Bills, That in the case of the following Bills, originating in the Lords, and referred on the First Reading thereof, the Standing Orders not previously inquired into, which are applicable thereto, have been complied with, namely:

West Yorkshire Gas Distribution Bill [Lords].

Stanmore Unused Burial Ground Bill [Lords].

Bilis to be read a Second time.

Canterbury Gas and Water Bill,

As amended, considered.

Ordered, That Standing Orders 240 and 262 be suspended, and that the Bill be now read the Third time.—[The Deputy-Chairman.]

Bill accordingly read the Third time, and passed.

Harwich Harbour Bill [Lords],

As amended, considered; to be read the Third time.

EXPERIMENTS ON LIVING ANIMALS.

Address for
Return of Licences granted under the Act 39 and 4o Vict., c. 77, showing the number of experiments performed under the Act during 1937, and the registered places at which such experiments may be performed (in continuance of Parliamentary Paper, No. 135, of 1937).—[Earl Winterton.]

Oral Answers to Questions — SCOTLAND.

PROVOSTS, SMALL BURGHS.

Mr. Kennedy: asked the Secretary of State for Scotland whether he is considering amending legislation on the lines of the resolution, unanimously approved by the Fife Small Burghs Association, dealign with the position of the provosts of small burghs who, prior to the passing of the Local Government (Scotland) Act, 1929, were ex officio justices of the peace and, as such, eligible to act as justices of the county licensing and licensing appeal courts?

The Secretary of State for Scotland (Mr. Colville): This question is, I am informed, under consideration by the committee appointed in December, 1937, to review the existing legislation affecting local authorities and local government and public health in Scotland. I propose to await the committee's report before deciding whether any action is called for on this matter.

Mr. Henderson Stewart: Will the right hon. Gentleman bear in mind that many provosts at the moment are put in an invidious position?

Mr. Colville: I will bear in mind all relevant circumstances.

Mr. T. Johnston: During the period when the right hon. Gentleman is waiting for the report of the committee, can he not consult his friend the Lord Chancellor and get individual cases, where necessary, dealt with?

Mr. Colville: I am hoping to have the committee's report before very long, but I will bear in mind what the right hon. Gentleman has said. I think it is wise to await the report before deciding on any action.

HOUSING.

Sir Douglas Thomson: asked the Secretary of State for Scotland (I) the total number of new houses required in Aberdeen to replace unfit houses and to put an end to overcrowding; how many houses were built for these purposes during 1937; and how many is it estimated will be built for these purposes during 1938;
(2) the percentage of overcrowded houses in Aberdeen and how long will it take to end overcrowding in that area at the present rate of building?

Mr. Colville: The report on the overcrowding survey carried out by the corporation in the winter of 1935, which contains the latest information available on the subject, shows that 23.8 per cent. of the fit houses in the city were overcrowded and that 7,088 new houses were required to put an end to overcrowding and to replace unfit houses. For these two purposes the corporation completed 526 houses in 1937, and they expect to complete 800 in 1938.

Sir D. Thomson: Can the right hon. Gentleman say how this progress compares with the progress in other burghs in Scotland?

Mr. Colville: I should require notice of that question.

Mr. Gallacher: Is the right hon. Gentleman aware that unless something is done for the fishing population of Aberdeen, they will be quite unable to pay the rent for these new houses when they are taken out of their overcrowded conditions?

Sir D. Thomson: asked the Secretary of State for Scotland how many houses have been built by the Scottish Special Areas Housing Association?

Mr. Colville: Tenders have been approved by the association for 66 houses in timber, of which two have been completed and occupied. In addition, the association have commenced to build 494 concrete houses and have schemes in hand covering 1,350 additional houses.

Mr. McGovern: asked the Secretary of State for Scotland whether he can state the needs of Glasgow in new houses for the purpose of slum clearance, overcrowding, and those who at present are unhoused; the number of houses built last year; the number per month to be built this year; and how many years it will take to rehouse those sections at the present rate of building?

Mr. Colville: At the beginning of 1936, the latest date for which information is available, the corporation estimated that a total of 65,000 new houses were required for the relief of overcrowding, the replacement of unfit houses and ordinary

requirements. The number of houses completed by the corporation during 1937 was 1,841. With regard to the last part of the question, the corporation completed 1,081 houses during the first five months of this year and they expect to complete 2,054 additional houses by 31st December next, making a total of 3,135 for the whole year or an average of 261 per month.

Mr. McGovern: As regards the last part of my question, how long will it take to house the population at this rate?

Mr. Colville: It is really impossible to make a forecast, because the rate does not necessarily continue the same, but I am hopeful from the improvement which is shown that there will be an acceleration in the provision of houses.

Mr. McGovern: In view of the great dissatisfaction regarding the rate of progress, will the right hon. Gentleman set up some form of inquiry into the housing question in Glasgow in order to see that all various methods of providing houses are gone into, as there is no chance of home life for a large percentage of the population unless this housing problem is solved?

Sir John Haslam: Will the right hon. Gentleman send a deputation from these towns in Scotland to Lancashire, to towns like Manchester and Bolton, where they will get lessons in housing?

Mr. Colville: I do not think I can deal with this subject by way of question and answer, but there may be an opportunity on the Estimates of discussing what I agree is an important point, that is, the progress of housing.

Mr. McGovern: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise this matter at the first available opportunity.

Mr. Westwood: asked the Secretary of State for Scotland whether the negotiations with the local authorities, with reference to the rates of subsidy for housing in Scotland, are still proceeding and with what results?

Mr. Colville: The negotiations are still proceeding, but I am not yet in a position to make any statement on the matter.

Mr. Westwood: Will the right hon. Gentleman say when these negotiations will be concluded, because local authori-


ties are afraid to proceed with their housing programme until they know exactly what the housing subsidies are to be?

Mr. Colville: I cannot name a date, but I can assure the hon. Member that I realise the importance of arriving at a decision as soon as possible.

Sir Malcolm Barclay-Harvey: asked the Secretary of State for Scotland which local authorities in Scotland have already erected timber houses; and what is the number of houses erected in each case?

Mr. Colville: Figures relating to the number of wooden houses built by local authorities in Scotland since 1918 were given in reply to a question by the hon. and learned Member for Greenock (Mr. R. Gibson) on 28th March. Since that date the Department of Health have approved tenders for the erection of 262 timber houses by the County Council of Lanark and four by the County Council of Angus.

Mr. Maxton: As the people of Scotland could be housed in good solid granite and sandstone 100 years ago, will the right hon. Gentleman see to it that he does not descend to this inferior substitute now?

Mr. Colville: I understood that the hon. Member's colleague a few moments ago wanted me to investigate every method which would help the housing conditions in Glasgow.

Mr. Maxton: I hope that the right hon. Gentleman will not understand that he is expected to start jerry building?

Mr. Colville: No, Sir, but timber may well be examined as an alternative building material in the present situation.

Mr. Robert Gibson: Can the right hon. Gentleman say how long it would take to build a house of granite?

OLD AGE PENSIONERS (PUBLIC ASSISTANCE).

Mr. Cassells: asked the Secretary of State for Scotland whether he will obtain statistics to establish the number of old age pensioners in receipt of public assistance but whose wives are not entitled to any pension allowance?

Mr. Colville: The statistics desired by the hon. Member could be obtained only

by means of a special inquiry on the part of local authorities, which I do not feel justified in asking them to undertake.

Mr. Cassells: Does not the right hon. Gentleman consider this information of vital importance having regard to the constant demand which is made for an increase in 'old age pensions? Does he not consider it would be well worth while to obtain this information?

Mr. Colville: I can assure the hon. Member that I did consider that aspect of the matter, but, as he knows, local authorities sometimes complain of the tasks they are asked to do, and it would involve a separate investigation into every case to get the figure required.

Mr. Gallacher: Will the right hon. Gentleman consider setting up a Select Committee of this House to consider the question of old age pensions and to end all these anomalies?

Mr. Cassells: Has the right hon. Gentleman personally made any approach to any local authorities to ascertain their opinion on this particular line of investigation?

BURGH PROSECUTOR, AYR.

Mr. Cassells: asked the Secretary of State for Scotland whether he is aware that the burgh prosecutor in Ayr burgh police court refuses in all cases under Section 12 of the Road Traffic Act, 1930, tried in that court, to furnish, on application by the accused person or his solicitor prior to the trial, the names and addresses of the witnesses for the prosecution; and whether he will take steps to make universal the practice followed by the instructions of the Lord Advocate in similar prosecutions in the sheriff courts in Scotland?

Mr. Colville: It is the practice of this prosecutor, unless satisfied that there are special circumstances to justify him in giving the names and addresses of witnesses for the prosecution, to refuse these particulars. I have already represented to him the desirability of altering his practice so as to bring it into line with the practice followed in Sheriff Court cases, and I am now in communication on the subject with the town council, from whom he holds his appointment.

Mr. Cassells: Is the Minister aware of the considerable degree of prejudice


which in cases similar to those referred to, is suffered by the accused person, and will he at the same time keep in mind the undertaking given by the Lord Advocate to hon. Members in the Scottish Standing Committee when this important problem was discussed, that he personally would bring pressure to bear on the Crown Office and all prosecutors, burgh and otherwise, to deal with this particular matter?

Mr. Colville: The hon. Member will note the action that I have taken.

FISHING INDUSTRY.

Mr. Robert Gibson: asked the Secretary of State for Scotland what were the kinds, quantities, and respective value of fish landed at Greenock during each of the first four months of 1938, and the corresponding figures for 1937?

Mr. Colville: As the reply involves a statistical table, I propose, with the hon. and learned Member's permission, to circulate it in the OFFICIAL REPORT.

Mr. Gibson: Have the figures gone up this year as against last year?

Mr. Colville: There has been a remarkable increase in herring, but a reduction in cod.

Following is the table:

Fish landed at the Port of Greenock.


1938.
Herring.
Mussels.




Cwts.
£
Cwts.
£


January
…
7,602
2,594
390
30


February
…
263
94
40
3


March
…
—
—
—
—


April
…
—
—
—
—

1937
Cod.
Mussels.




Cwts.
£
Cwts.
£


January
…
—
—
300
21


February
…
—
—
310
17


March
…
—
—
350
27


April
…
4
4
12
1

RELIEF (APPEALS).

Mr. Maxton: asked the Secretary of State for Scotland whether he is aware that, in cases where persons appeal to the Board of Health against either refusal of relief or the amount received, such

decision is given in all cases without the person appealign being heard, and that in Glasgow the person so appealign is never heard at any time in person by a committee; and whether he will take steps to see that in all cases the person is given the right of hearing?

Mr. Colville: In considering statutory complaints of inadequate relief, it is the practice of the Department, if they have any doubt about the adequacy or suitability of the relief offered by the local authority, to remit the complaint to a general inspector to make local inquiry; and the complainer is visited and interviewed at his home whenever the facts of the case indicate that this course is necessary or desirable. This practice is followed in dealign with complaints from any part of Scotland, including Glasgow.

Mr. Maxton: If this is to be a proper appeal of a quasi-judicial kind, why cannot the person affected have the right to appear personally when his case is being adjudicated on?

Mr. Colville: I am not prepared to suggest an alteration of the Department's practice without evidence that the present practice is unsatisfactory, and I am told that in fact there is little complaint of the manner in which appeals are conducted.

Mr. McGovern: Is the right hon. Gentleman aware that frequently in the course of our duties we get applicants who have not been seen, and that a false case has been presented to the committee against the individual and he has had no chance to rebutt false evidence brought forward?

Mr. Colville: If the hon. Member has a case in mind and would like to show it to me, I will look into it, but I have seen no evidence to suggest that I ought to propose an alteration.

Mr. Maxton: Will the right hon. Gentleman take this question as being a complaint against the present practice?

EVICTIONS, GLASGOW.

Mr. Maxton: asked the Secretary of State for Scotland whether he is aware that at the Glasgow eviction court, when a decision is given to evict a tenant from his house, the decision is given as settled with the factor; that the tenant usually


thinks this is not final, but means that he is to make an attempt to find a settlement, and in this he has failed to understand a decree for eviction was made; whether he will take steps to have this altered so that the tenant will be under no disadvantage in following the decision; and whether he will also take steps to see that in all such cases the decision is given in writing?

Mr. Colville: I am informed by the Sheriff that where a decree of eviction is pronounced by the Sheriff Substitute in favour of the pursuer, with whom its enforcement rests, the tenant may sometimes be told to see if he can come to a settlement with the pursuer to obviate its enforcement. This suggestion which is made in the interest of the tenant, should not give rise to misunderstanding. The decrees are given in writing.

Mr. Cassells: Is it not a well-known fact that in these eviction cases the individual tenants definitely have the right of suspension proceedings, and would it not be better to make that fact known to the tenants throughout the whole of Scotland?

Mr. Thorne: Where do these evicted tenants go after they have been evicted?

Mr. Maxton: Will the Minister personally investigate this, as I am quite sure his information is not exact, and this really is a scandal that ought to be investigated?

Mr. Colville: Here, again, my information is that the suggestion which is made by the court is in the interests of the tenant, but I am prepared to examine the procedure in order to see whether it works satisfactorily.

Mr. Thorne: Can the Minister state where these evicted tenants go? Do they go to prison, or to the workhouse?

AIR-RAID PRECAUTIONS.

Mr. J. J. Davidson: asked the Secretary of State for Scotland whether he is aware of the considerable amount of travelling expenses incurred by Scottish local government officials attending anti-gas schools in England; and whether he proposes to establish an anti-gas training school in Scotland?

Mr. Colville: I would refer the hon. Member to the Reply given on 2nd June

to a question on this subject by my hon. Friend the Member for East Fife (Mr. Henderson Stewart).

Mr. Davidson: Is the right hon. Gentleman aware that since then the combined local authorities of Scotland have made representations that an anti-gas school should be established in Scotland and thus save them those expenses, and in view of the fact that this is a reasonable and legitimate demand from the Scottish local authorities, and that the refusal tends to act against efficient air-raid precautions schemes, will he reconsider the whole proposal?

Mr. Colville: No, Sir. I should require to have fresh evidence submitted to me that, in fact, the present arrangement is unsatisfactory.

Mr. Davidson: Will not the Secretary of State accept as evidence the fact that the whole of the Scottish local authorities say that it is unnecessary and expensive?

Mr. Colville: I have received no such representation.

DEVELOPMENT COUNCIL (ECONOMIC COMMITTEE'S REPORT).

Mr. Davidson: asked the Secretary of State for Scotland when the report of the Economic Committee of the Scottish Development Council will be issued; and whether the report will be submitted to Scottish local authorities for their observations?

Mr. Colville: I understand that a report by the Economic Committee of the Scottish Development Council on its second year of work will be available in the near future. The report will no doubt be available to local authorities.

Mr. Davidson: Will the right hon. Gentleman answer the last part of the question? Will he, as Secretary of State for Scotland, issue this report to the local authorities and ask for their observations?

Mr. Colville: The report is not made to me, but by the Committee of the Scottish Development Council to the Council. It is generally available in booklet form.

Mr. Davidson: Will not the Secretary of State accept it as advisable that this report affecting Scottish affairs should be circulated to local authorities so that he could be fully informed of their beliefs on this question?

Mr. Colville: It is not primarily a matter for me, but for the Council.

Mr. Davidson: May I suggest to the right hon. Gentleman that it would do him a lot of good?

LOCAL GOVERNMENT ADMINISTRATION.

Mr. Mathers: asked the Prime Minister whether he has considered the memorandum submitted by the Royal Sanitary Association of Scotland calling for the appointment of a Royal Commission to inquire into local government administration in Scotland; and whether he is prepared to comply with the request made?

The Prime Minister (Mr. Chamberlain): I have seen the memorandum referred to and have consulted my right hon. Friend the Secretary of State. As at present advised, I am not satisfied that there are sufficient grounds for the appointment of a Royal Commission to inquire into Scottish local government administration, but the views expressed by the association have been noted and a careful watch will be kept on the working of Scottish local government arrangements, particularly in their relation to central Departments and commissions.

Mr. Mathers: Does not the Prime Minister realise that this agitation has been going on for a number of years; and does he not recognise that in this memorandum there are very powerful reasons why a comprehensive inquiry should now be held into the question of Scottish local government?

Mr. Davidson: Is the Prime Minister aware that Scottish local administration is retarded in its efficiency by bad national administration?

The Prime Minister: I am aware that this is a question which has been raised from time to time over a considerable number of years. The matter has been carefully examined in the Scottish Office I understand, and the result of that examination is that, as at present advised, there is not sufficient ground for the appointment of a Royal Commission. But as I have said to the hon. Member, I myself have read the memorandum in question, and I recognise that there are important matters raised in it which will be kept under consideration.

Mr. Mathers: Are we to understand that at some future time when more informa

tion has been gathered, the question of appointing a Royal Commission to inquire into the whole matter will be considered?

The Prime Minister: That is not excluded.

Oral Answers to Questions — COAL INDUSTRY.

DISTRIBUTION COMMITTEE.

Sir Arnold Wilson: asked the Secretary for Mines whether the Coal Distribution Committee under Sir W. Monckton will sit in public; and whether the evidence tendered will be printed and published as the inquiry proceeds?

The Secretary for Mines (Captain Crookshank): This committee will take evidence in public except when it decides that it may be advisable to hear evidence from firms or individuals in private. The evidence taken in public will be printed and published as the inquiry proceeds.

EXPORT TRADE.

Mr. A. Jenkins: asked the Secretary for Mines whether any action is contemplated by either the Government or the colliery owners to deal with the serious decline in the export of coal from this country due to competition with heavily subsidised foreign coals, and, if so, what?

Captain Crookshank: I would refer the hon. Member to the reply which I gave on 2rst June to the hon. Member for Llanelly (Mr. J. Griffiths). I am informed that the position of the coal export trade is engaging the serious attention of the coal industry: bat no detailed proposals for dealign with it have yet been put before me.

Mr. Mander: Is not part of this decline due to the failure of the Government to protect British shipping from attack?

UNDERGROUND WORKERS, YORKSHIRE (STATISTICS).

Mr. T. Smith: asked the Secretary for Mines the number of underground wage earners on colliery books in South and West Yorkshire, respectively, on the latest date available, and the comparative figures for 1937, 1932, and 1933?

Captain Crookshank: As the reply involves a number of figures, I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.

Mr. Smith: Do the figures to-day show any improvement over a year or two ago?

—
Wage-earners on Colliery Books employed belowground at coal mines.


June, 1932.
June, 1933.
June, 1937.
June, 1938. (Estimated).


Yorkshire, South
…
…
…
85,900
78,800
78,400
79,500


Yorkshire, West
…
…
…
39,500
34,300
33,300
34,200

CINEMATOGRAPH FILMS (DOMINIONS).

Mr. Day: asked the Secretary of State for Dominion Affairs which of the Dominions have agreed now to introduce legislation comparable and covering the Sections introduced in the Cinematograph Films Act, 1938?

The Secretary of State for Dominion Affairs (Lord Stanley): The Premier of New South Wales stated in March last that he was considering the amendment of the existing law in that State so as to provide for reciprocity with other British countries giving similar treatment to Australian films, but I am not aware that any Bill for this purpose has yet been introduced. I have no information as to the intention of Governments in the Dominions elsewhere. I would add that legislation of this nature is necessarily related to the conditions prevailing in the film industry in the country in which it is passed and that legislation similar to the Cinematograph Films Act, 1938, would not, therefore, necessarily be appropriate to the varying conditions in each of the several Dominions.

Mr. Day: Are any communications passing between this Government and the Governments of the Dominions to see whether the Dominions intend to bring in legislation with regard to the working of this Act?

Lord Stanley: None that I am aware of. Perhaps the hon. Member will put that question on the Paper.

Mr. Mander: Was it not suggested in the Moyne Report that negotiations should take place with the Dominions on the subject? Are not the Government going to do anything about this?

Captain Crookshank: Yes, Sir. In both cases they show an improvement over last year.

Following is the information:

NEWFOUNDLAND (COMMISSIONER FOR FINANCE).

Mr. Creech Jones: asked the Secretary of State for Dominion Affairs whether the Commissioner for Finance in the Government of Newfoundland is an official of His Majesty's Treasury; whether he acts under the direct instructions from the Dominions Office or the Treasury, or whether he uses his unfettered judgment on matters which come before the Commission; and whether he exercises over the expenditure of the Departments under the other Commissioners any control analogous to that exercised by the Treasury in Great Britain?

Lord Stanley: The present Commissioner for Finance in Newfoundland is an officer seconded from the Treasury in this country. As regards the second part of the question, any instructions from the Secretary of State are given to the Commission of Government as a whole, and not to individual Commissioners, and the position of the Commissioner for Finance is precisely the same in this respect as that of the other Commissioners. As regards the last part of the question, the position is analogous to that in this country, in that the control exercised by the Commissioner for Finance is subject to such decisions affecting expenditure as may be taken from time to time by the Commission as a whole.

Oral Answers to Questions — TRADE AND COMMERCE.

GREAT BRITAIN AND UNITED STATES (TRADE AGREEMENT NEGOTIATIONS).

Sir Louis Smith: asked the President of the Board of Trade whether, in the negotiations for the Anglo-American treaty, he will consider the desirability of


so framing the treaty that Japan will not be able under the Most-Favoured-Nation Clause to take advantage of all the concessions made to this country in respect of imports into the United States?

The President of the Board of Trade (Mr. Oliver Stanley): The tariff treatment by the United States Government of imports from Japan is entirely a matter for that Government. I can assure my hon. Friend, however, that the question of ensuring that tariff concessions accorded to the United Kingdom under a trade agreement with the United States are so framed as to ensure benefits to those classes of goods in which the United Kingdom has a major interest is being fully kept in mind.

Mr. Sorensen: asked the President of the Board of Trade whether in the trade negotiations now proceeding with the United States Government, he will consider the advisability of arranging extensive tariff concessions on trade to and from the Colonial Empire?

Mr. Stanley: The negotiations now in progress embrace trade between the Colonial Empire and the United States. I can assure the hon. Member that I am maintaining close touch with my right hon. Friend the Secretary of State for the Colonies.

Mr. Sorensen: Does the right hon. Gentleman not realise that tariff barriers do affect very adversely the natives in our Colonial Empire, and can we take it that as a result of these negotiations the burdens upon these natives will be materially lightened?

COTTON INDUSTRY.

Mr. Rostron Duckworth: asked the President of the Board of Trade whether, in view of the excessive depreciation of the Japanese yen and of the fact that wages in the Japanese textile industry are only about one-fifth of those ruling in Lancashire, he will take steps to have countervailing duties imposed in British Empire markets to compensate for this unfair advantage held by the Japanese cotton export industry?

Mr. Stanley: The problem of Japanese competition in British Colonial markets has been dealt with by a system of quotas which have been applied generally except in cases where international engagements preclude that course. In my view this

method is more effective than that suggested by my hon. Friend.

Mr. Leach: Does the right hon. Gentleman look forward to the day when everything coming into the country will be tariffed and everything going out subsidised?

Mr. Rostron Duckworth: asked the President of the Board of Trade whether his attention has been drawn to the fact that £1,391,000 of cotton textiles were imported into Kenya, Uganda, Tanganyika and Nyasaland in 1936 from Japan, and £197,000 worth of such goods from the United Kingdom; and when action will be taken to modify the Congo Basin Treaties and thus enable us to limit the imports of Japanese textiles into these territories?

Mr. Stanley: I am aware that the position is as stated by my hon. Friend, except that imports from Japan amounted to £1,296,000. As regards the last part of the question, I would refer to the answers which I gave on 31st May to the hon. Members for Withington (Mr. Fleming) and Burnley (Mr. Burke).

Mr. Palign: Is the right hon. Gentleman aware that the reason why the natives cannot buy goods from this country is because they are paid less wages than the wages paid in Japan?

Colonel Sandeman Allen: Are we to understand from that answer given in May that the Congo Basin Treaties cannot be altered at all?

Mr. Stanley: Yes, Sir, except by general agreement.

Mr. Kennedy: asked the President of the Board of Trade whether he is aware that, while British cotton exports to India have to overcome a tariff barrier of 20 per cent., the cheaper Indian products are rapidly displacing the products of British industry in the home and world market; and whether he can state the extent to which the Indian cotton trade is owned and controlled by British bankers and financiers?

Mr. Stanley: I am afraid I cannot accept the statements in the first part of the question. There is no evidence of any recent substantial increase of imports of Indian cotton yarns and manufactures into the United Kingdom; while total


exports of Indian cotton piece-goods to all markets, although they have increased, are still very small compared with United Kingdom exports. The situation in Empire markets, in which Indian goods enjoy free entry, is being kept well in mind in the negotiations for a new trade agreement between the United Kingdom and India; and one of the major objects in these negotiations is a satisfactory settlement in regard to United Kingdom trade with India in cotton goods. I have no official information on the subject of the second part of the question, but I am not aware that United Kingdom bankers or financiers have any substantial interest in the Indian cotton industry, and I understand that the extent of the interest of United Kingdom industrialists and merchants in that industry is relatively small.

SWITZERLAND.

Major Rayner: asked the President of the Board of Trade whether he has taken note of the fact that while imports into the United Kingdom from Switzerland in the first quarter of 1938 have increased by £200,000, as compared with the corresponding quarter of 1937, exports to that country have declined by £300,000; and whether he is making any representations to Switzerland in the matter?

Mr. Stanley: The answer to the first part of the question is in the affirmative. As my hon. and gallant Friend is doubtless aware, negotiations are in progress for the conclusion of a trade agreement between the United Kingdom and Switzerland, and the facts to which he has drawn attention will be borne in mind.

NORWAY.

Major Rayner: asked the President of the Board of Trade whether his attention has been called to the fact that a substantial increase in the imports from Norway during the first quarter of 1938 as compared with the corresponding quarter of 1937 has been accompanied by a decline in the British exports to that country; and whether he can offer any explanation of this situation?

Mr. Stanley: The answer to the first part of the question is in the affirmative. With regard to the second part, I would refer my hon. and gallant Friend to the

answer given on 23rd May to a similar question relating to Belgium by my hon. Friend the Member for Newport (Sir R. Clarry).

BALANCE OF TRADE.

Major Rayner: asked the President of the Board of Trade whether his attention has been called to the fact that imports from foreign countries in the first quarter of 1938 are £13,500,000 higher than in the corresponding quarter of 1937, whilst the exports of British goods to foreign countries are nearly £4,000,000 lower, and re-exports to foreign countries £3,000,000 lower; and whether, in view of the adverse balance of trade at the end of the year 1937, he will take some steps to rectify this position?

Mr. Stanley: Though there was an increase in the excess of imports over exports of merchandise for the first quarter of this year compared with a year earlier, a decline was recorded in each of the subsequent two months. The latter improvement in the adverse balance applied to both British and foreign countries. As regards the second part of the question, I would refer to the answer which I gave on 24th May to my hon. Friend the Member for South Croydon (Mr. H. G. Williams).

FISHING INDUSTRY.

Mr. Rostron Duckworth: asked the President of the Board of Trade the total value of fish landed direct by British vessels in the last year for which statistics are available and also the value of the importation of fish from foreign countries?

Mr. Stanley: During the year 1937, the value of fish landed direct in the United Kingdom by British fishing vessels was £15,934,000, and the value of fish imported into the United Kingdom from foreign countries was £8,335,000. The latter figure includes canned and preserved fish as well as fish brought by foreign vessels from the fishing grounds.

WHEAT STOCKS.

Mr. Maclay: asked the President of the Board of Trade whether, as a result of the Government purchases of wheat, he anticipates that the total amount of wheat in the country will be the normal amount of wheat usually estimated on plus the additional Government purchases?

Mr. Stanley: The answer is in the affirmative. The existence of the Government wheat reserve, maintained at a constant quantity, will not affect the requirements of the grain and milling trades and consequently should not affect either the price of wheat or the quantities normally held in stock by the trades concerned. The millers who have undertaken the custody and supervision of the Government wheat have given an undertaking that the amount of stocks which they normally hold will not be reduced because of the existence of the Government reserve.

Mr. Maclay: Is the Minister aware that concern is felt in certain quarters that dealers in wheat in this country will tend to reduce their normal stocks, and does his reply mean that all persons connected with wheat who normally hold stocks have given a guarantee that they will not reduce stocks in view of the Government's purchases?

Mr. Stanley: As I said, we have a guarantee from these large millers, but I cannot be expected to get guarantees from everybody. The point is that these stocks are immobilised. Nobody can rely on these stocks, and there is therefore no inducement to them to reduce their own stocks.

Mr. H. G. Williams: Can the right hon. Gentleman say whether the Government imports of wheat are shown in the trade return?

Mr. Stanley: That is another question.

Mr. R. Gibson: What steps are being taken to increase storage accommodation, in view of the Government's policy?

Mr. Stanley: That is a rather different question.

Mr. Maclay: Unless the Minister can give the House an assurance that the vast majority of dealers will not reduce their stocks at all, is not the taxpayers' money being spent in vain?

Mr. Stanley: If the hon. Gentleman will read my answer he will see that I state that there is no inducement in this method to private dealers to reduce stocks. I cannot get a guarantee from all the innumerable traders concerned, but our information is that in fact they are not doing so, and will not do so.

Mr. Gibson: Is it not clear that unless there is additional storage accommodation, the Government's intention will be defeated?

SPAIN (COASTAL TRADE).

Mr. Marcus Samuel: asked the President of the Board of Trade whether he has any information as to the date and exact provisions for the abolition of the Spanish Government shipping regulations whereby foreign vessels are now permitted to engage in Spanish coastal trade; and what are the details of that information?

Mr. Stanley: I have not received any detailed information on the matter referred to by my hon. Friend, but I understand that for some time past foreign (non-Spanish) shipping has been allowed by the Spanish Government to participate in the coasting trade between their ports.

CALCIUM CARBIDE.

Mr. Rowlands: asked the President of the Board of Trade the amount of calcium carbide used by armament-producing firms in the United Kingdom during the years 1935, 1936, and 1937, respectively?

Mr. Stanley: I regret that this information is not available.

Mr. Rowlands: asked the President of the Board of Trade the average price per ton of the calcium carbide imported into the United Kingdom during the years 1935, 1936, and 1937, respectively?

Mr. Stanley: The average value of the calcium carbide imported into the United Kingdom during the years 1935, 1936 and 1937 was –10.98, –11.03 and –10.88 per ton, respectively.

Mr. Aneurin Bevan: Is the hon. Gentleman satisfied that this is a reasonable price?

Mr. Stanley: That is a rather different question.

JAPANESE TEA.

Mr. David: Adams asked the President of the Board of Trade whether he is aware that a large proportion of Japanese tea is sold in England as China tea; and whether he will insist on a clearer definition of origin so as to avoid any deception of the public?

Mr. Stanley: I have not received any representations on this matter, but if the. hon. Member will communicate to me any


evidence that he may have in regard to it, I shall be glad to consider it.

Mr. Adams: I shall be glad to do so.

CROWN COLONIES (JAPANESE GOODS).

Sir J. Haslam: asked the President of the Board of Trade to what extent we are bound by treaty to admit Japanese goods into our Crown Colonies?

Mr. Stanley: His Majesty's Government are not in a position to discriminate between Japanese and United Kingdom goods in the territories to which the Congo Basin Treaties apply, nor in Mandated territories. Discrimination between Japanese goods and the goods of other foreign countries is not possible in other parts of the Colonial Empire so long as the provisions of the Anglo-Japanese Treaty of 1911 apply to them, though this does not prevent the imposition of duties or quotas as long as such measures are applied to all foreign countries.

Sir J. Haslam: Is it not possible to give notice for the abrogation of the Congo Basin Treaties and the Treaty of 1911 under which English trade is suffering so severely?

Mr. Stanley: It has already been explained in the House that it is not possible to give notice to determine the Congo Basin Treaties, and the Anglo-Japanese Treaty does not prevent the imposition of quotas in the Colonial Empire, provided they are imposed against all foreign goods.

Sir J. Haslam: Are we to understand that the Congo Basin Treaties are made for ever and can never be abrogated in any possible way?

Mr. Stanley: That is a matter which has often been discussed in the House, and the opinion given by our legal advisers is that they cannot be determined by unilateral action but only by general agreement.

Mr. Burke: Is it not possible to get all the signatories of the treaty together? Cannot the right hon. Gentleman take the initiative?

Mr. Stanley: It would of course be possible, but the hon. Member will bear in mind that one of the signatories is Japan.

Mr. H. G. Williams: Can the right hon. Gentleman say whether the treaty is

still in operation as between this country and Germany?

Mr. Palign: Would not the consumption of British goods in these colonies be much increased, if the purchasing power of the natives was raised?

IMPORTED FOODSTUFFS, LANCASHIRE.

Mr. Chorlton: asked the President of the Board of Trade the total imports of foodstuffs into the ports of Lancashire and what proportion they bear to the total imports of the country?

Mr. Stanley: During 1936 the value of food and drink (including living animals for food and feeding stuffs for animals) imported at ports in Lancashire amounted to £71,000,000, almost one-fifth of the total value of such imports into the United Kingdom. The proportion was the same in the previous two years; figures for 1937 are not yet available.

Mr. Chorlton: Can my right hon. Friend say what amount of foodstuffs there is in the county?

Mr. Stanley: Not without notice.

RUSSIA (BRITISH CONSULATES).

Captain Ramsay: asked the Prime Minister whether he has recently approached the Government of the Union of Soviet Socialist Republics with a view to negotiating for the re-opening of the British consulate at Leningrad and the establishment of consulates at those Soviet ports where British trade is heaviest?

The Under-Secretary of State for Foreign Affairs (Mr. Butler): No, Sir.

Captain Ramsay: Are the Government proposing to take any further action, in view of the hardship of British traders having no representation at all?

Mr. Butler: In view of the attitude adopted at the time by the Soviet Government in regard to the closure of these consulates, we think that it would be useless to approach them again in this matter.

FILMS COUNCIL (CHAIRMAN).

Mr. Mander: asked the President of the Board of Trade whether the new chairman of the Films Council will be engaged full-time on his duties; and what salary will be paid to him?

Mr. Stanley: The Chairman of the Films Council will devote such time to the work of the Council as may be necessary, but it is not expected that his duties will absorb the whole of his time. He is receiving an honorarium of £500 a year for this work.

Mr. Mander: Are any of the other members of the Council to be paid?

Mr. Stanley: No, Sir.

ACTS OF PARLIAMENT (COST).

Mr. H. G. Williams: asked the Chancellor of the Exchequer whether he can furnish an approximate estimate of the cost, in a full year of operation, to the Exchequer and to the local authorities, respectively, of the legislation since the last General Election, including the Government Bills now before Parliament and excluding from the total any expenditure due to the Defence programme?

The Chancellor of the Exchequer (Sir John Simon): As the answer is of considerable length, I will, with my hon. Friend's permission, have it circulated in the OFFICIAL REPORT.

Mr. T. Williams: Will the statement include a full list of all direct and indirect subsidies which have been granted to various industries since the last General Election?

Sir J. Simon: If the hon. Member looks at the statement he will see that it does not err on the side of brevity.
Following is the statement:
The incidence and nature of expenditure under Acts of Parliament vary so widely between one case and another that it is impossible to give a figure of total cost "in a full year of operation." While in some cases the cost reaches a stable figure as soon as the service has come into full operation, and thereafter continues at about that figure, there are other cases where the service is expressed to be temporary or where a specified sum is allotted to a service, and where therefore the expenditure disappears after a period, and there is a further type of case of long-term subsidies (e.g., housing subsidies) where the cost grows by annual steps over a long period of years because the expense of the subsidy granted in each year is added to the subsidies already

in payment in respect of the sanctions of preceding years. In estimating the cost of particular measures of legislation it is also necessary, in the majority of cases, to proceed upon certain assumptions and to attach various reservations.
In these circumstances it appears that the information sought in the question can best be furnished in the form of a statement showing as far as possible the estimated cost of particular Acts or groups of Acts in chronological order and indicating the main assumptions made and the reservations attached to each. In the statement the phrase "cost to the Exchequer" means annual cost except where the contrary is clear from the context. Fuller explanations of the financial effect of the various measures are given in the Financial Memoranda which were attached to the Bills on presentation.
In compiling the statement which follows, certain measures involving expenditure of relatively trivial amount have been ignored, as have also any additional administrative costs due to changes in taxation under the various Finance Acts or administrative costs where only incidental to the main purpose of an Act. It has also been assumed that the question does not cover cases in which liabilities have been assumed in the form of guarantees, cases of remission of taxation or waiver of claims to payment, and cases in which expenditure in certain directions has been covered by increased receipts or reductions of cost in other directions. The exclusion of defence expenditure mentioned in the question has been treated as applying to expenditure under the Air-Raid Precautions Act, 1937, and the Essential Commodities Reserves Bill, 1938.
Subject to the above, the information required is as follows:
Milk Acts, 1936 and 1937, and Milk Bill, 1938.
The estimated additional cost to the Exchequer is £742,000. These measures extend the period of operation of the Milk Act, 1934. Section 9 of that Act relating to the Improvement of Quality of Milk Supplied was repealed by the Agriculture Act, 1937, which provided for such expenditure to be defrayed from the Diseases of Animals Account (see under Agriculture Act, 1937).

Unemployment (Northern Ireland Agreement) Act, 1936.

Additional cost to Exchequer, £112,000.

Unemployment Insurance (Agriculture) Act, 1936.

Additional cost to the Exchequer, £550,000.

Sugar Industry (Reorganisation) Act, 1936.

The estimated cost of this Act is £2,550,000. The Act continues, subject to certain modifications, the subsidy in respect of sugar which was authorised by the British Sugar (Subsidy) Act, 1925.

Midwives Act, 1936.

Maternity Services (Scotland) Act, 1937.

The estimated additional cost of the former Act to the Exchequer and to local authorities is £345,000 and £345,000 respectively and of the latter Act £60,000 and £60,000 respectively. These Acts also impose temporary liabilities in respect of compensation to midwives who surrender their certificates.

Education Act, 1936.

Education (Scotland) Act, 1936.

The additional cost to the Exchequer and to local authorities of the former Act is estimated at £1,695,000 and £665,000 respectively, and of the latter Act £235,000 and £95,000 respectively. The total cost to the Exchequer includes £230,000 in respect of the increased cost of children's allowances payable under the Widows', Orphans' and Old Age Pensions Act. The extension of school-leaving age will also have some effect on the State contribution under the Unemployment Insurance Acts but it is impossible to frame a reliable estimate of the sum involved.

Air Navigation Act, 1936.

This Act which repealed the Air Transport (Subsidy Agreements) Act, 1930, substituted a figure of £1½ millions, payable until 1953, for a figure of £1 million, payable until 1940, as the maximum annual subsidy for civil air transport. It also authorised the payment of a contribution, which has been fixed at a maximum of £12,000 per annum for five years, towards the expenses of the Air Registration Board.

Merchant Shipping (Carriage of Munitions to Spain) Act, 1936.

Additional cost to the Exchequer, £5,000

Expiring Laws Continuance Act, 1936, and Special Areas (Amendment) Act, 1937.

The Special Areas (Development and Improvement) Act, 1934, was continued under the first of these Acts from the 1st April, 1937, and was further continued and amended under the second Act. No estimate of the annual cost of this legislation can be given, but the following Exchequer commitments (to be liquidated over the next few years) have been incurred between 1st April, 1937, and 31st May, 1938, namely, grants £5,135,000, loans £2,964,000. Part of the sum shown as grants will, in certain circumstances, yield a return to the Exchequer; the figure shown as loans includes a subscription for share capital of a site company under Section 5 of the Amendment Act. Schemes financed in part by the Special Areas Commissioners under these Acts and in part by local authorities under other powers have involved those authorities in corresponding commitments amounting to £1,423,000.

Trunk Roads Act, 1936.

The estimated additional cost to the Exchequer of this Act in the current year is £1,500,000. The additional cost to the Exchequer of maintaining trunk roads is estimated at £660,000 per annum. No estimate of the cost of improvements in future years can be given, but the figure of £1,500,000 given above is the estimated additional cost of maintenance and improvements in the current year. The effect of the Act was to transfer expenditure from rates to the Exchequer and, as explained below, account was taken in arriving at the block grants under the Local Government (Financial Provisions) Act, 1937, and the Local Government (Financial Provisions) (Scotland) Act, 1937, of savings to local authorities on maintenance.

Empire Settlement Act, 1937.

This Act extended the Empire Settlement Act, 1922, and substituted a figure of £1½ millions for the previous figure of £3 millions as the maximum expenditure which might be incurred in any financial year on Empire Settlement.


Actual expenditure depends upon the number and nature of schemes qualifying for assistance, the provision in 1938 Estimates being £3,075.

Local Government (Financial Provisions) Act, 1937.

Local Government (Financial Provisions) (Scotland) Act, 1937.

The estimated additional cost to the Exchequer of these two measures may be put at £4,552,000 and £1,345,000, respectively. The whole of these amounts are actual payments to local authorities, but are in the main in respect of increases in their expenditure during the preceding fixed grant period. The additional sums mentioned include the cost to the Exchequer of the discontinuance of Local Authorities' Unemployment Assistance Contribution, and in the case of England and Wales of compensation for the abolition of the Male Servants Licence Duty. When the general Exchequer Contributions for the current fixed grant period were fixed, and the results embodied in the Acts, account was also taken of the savings to Local Authorities under the Trunk Roads Act, 1936, mentioned above, and the Contributions would have been greater by £155,000 had this account not been taken.

Diseases of Fish Act, 1937.

Additional cost to the Exchequer, £20.

Statutory Salaries Act, 1937.

Additional cost to the Exchequer, £35,000.

Ministers of the Crown Act, 1937.

Additional cost to the Exchequer, £37,000 plus a further charge, which cannot be precisely estimated, in respect of pensions to ex-Prime Ministers.

Widows', Orphans' and Old Age Contributory Pensions (Voluntary Contributors) Act, 1937.

The estimated additional charge to the Exchequer may be put at £1,200,000. As this is a voluntary scheme, no reliable estimate of its cost can be made until the number of initial entrants is known. The financial basis of the Bill is to liquidate the cost of initial entrants over a 30-year period. On the assumption that there are 250,000 male initial entrants and 100,000 women initial entrants, the annual provision necessary for this purpose will be about £1,200,000 as already stated. In

15 years' time the additional burden will begin to fall upon the Exchequer in respect of pensions of special voluntary contributors who have reached the age of 70. No very reliable estimate can be made of the amount of this burden but in 30 years' time it may be between £1,500,000 and £2,000,000 a year. By that time, however, the capital liability referred to above will have been discharged.

Physical Training and Recreation Act,1937.

The main expenditure under this Act is in the form of capital grants and it is estimated that a sum of £2,400,000 will be spent over a period of three years ending 31st March, 1940. Certain annual expenditure is also involved which may amount to £240,000 a year. This cost will fall upon the Exchequer; some expenditure by local authorities will also be involved but it is not possible to estimate its amount.

Livestock Industry Act, 1937.

The estimated cost of this Act is £4,575,000. The Act replaces the Cattle Industry (Emergency Provisions) Acts, 1934 to 1936, which provided for the payment of a similar subsidy.

Matrimonial Causes Act, 1937.

Additional cost to Exchequer, £10,000.

Factories Act, 1937.

Additional cost to the Exchequer, £30,000. No material increase involved in the expenditure of local authorities.

Local Government Superannuation Act,1937.

Local Government Superannuation (Scot land) Act, 1937.

The estimated cost to local authorities of the introduction of compulsory superannuation of officers under these two Acts is £250,000 and £50,000 respectively. The cost of the optional power to provide superannuation for local authorities' servants cannot be estimated.

Agriculture Act, 1937.

The estimated cost of Parts I, II and III of this Act is £1,282,439, £203,000 and £116,000 respectively. The cost of Part IV of the Act is estimated at £600,000, part of which would have been borne on the Milk Votes but for the repeal of Section 9 of the Milk Act, 1934 (see under Milk Acts, 1936 and 1937).

Supreme Court of Judicature (Amendment) Act, 1937.

Additional cost to Exchequer, £14,000.

National Health Insurance (Juvenile Contributors and Young Persons) Act, 1937.

The additional cost to the Exchequer is £120,000 declining to £90,000 in five years' time.

Unemployment Insurance Act, 1938.

Additional cost to the Exchequer, £110,000; to local authorities, £10,000.

Blind Persons Act, 1938.

The additional cost to the Exchequer is estimated at £160,000. The broad effect of the Act will be to diminish rather than to increase the cost to local authorities.

Housing (Financial Provisions) Act, 1938.

The estimated additional cost to the Exchequer and to local authorities is estimated at £539,000 and £404,000 respectively. The contributions authorised by this Act are mainly in substitution for those which would have been payable had the subsidies available under the Housing Act, 1936, continued unchanged. The figures given above represent net additions consequent upon the Act in respect of houses and flats estimated to be completed up to the 3oth September, 1942, before which date the contributions will be reviewed. The contribution in respect of each dwelling continues for 40 years.

Eire (Confirmation of Agreement) Act, 1938.

The additional charge to the Exchequer, as compared with the position existing prior to the Agreement, is estimated at £684,000 p annum. This figure does not take account, on the one hand, of the capital payment received from the Government of Eire or, on the other hand, of the reduction of revenue under the Irish Free State (Special Duties) Act, 1932, and the Import Duties Act, 1932.

Sea Fish Industry Act, 1938.

Additional cost to the Exchequer, £9,300.

Air Navigation (Financial Provisions) Act, 1938.

This Bill increases from£1½millions to £3 millions the annual maximum amount which may be paid as subsidies to civil air transport (see under Air Navigation Act, 1936, above).

Housing (Rural Workers) Amendment Act, 1938.

The estimated additional cost to the Exchequer and to local authorities is £110,000 and £106,000 respectively. This Act continues with some amendments until the 30th September, 1942, powers which would have otherwise expired on the 24th June, 1938. The figures given above represent an estimate of the annual cost of this extension at the peak year, i.e. in 1943. This cost will continue unabated for 17 years and disappear at the end of 20 years. From 1947 onwards there will be an offset as payments arising out of the earlier Acts terminate.

Housing (Agricultural Population) (Scotland) Bill, 1938.

Under Clause I of the Bill, additional charges of £18,000 and £5,500 will fall upon the Exchequer and local authorities respectively. These figures represent the estimated net cost in 1940–41, at which date the basis of the subsidy will be reviewed. The figures for 1940–41 will continue for 38 to 40 years. Under Clause 8 of the Bill, additional charges of £36,000 and £7,000 will fall upon the Exchequer and local authorities respectively. This clause expires after five years but the figures given will continue for 35 to 40 years.

Fire Brigades Bill, 1938.

The additional cost to the Exchequer is estimated at £25,000. The Bill will involve additional cost to local authorities in certain areas only, and this additional cost is not likely to exceed the produce of a penny rate.

Bacon Industry Bill, 1938.

The estimated average cost of this measure is £1,000,000.

Herring Industry Bill, 1938.

The estimated additional average cost of this Bill to the Exchequer may be put at £70,500.

Supreme Court of Judicature (Amendment) (No. 2) Bill, 1938.

Additional cost to Exchequer £21,000.

GREAT BRITAIN AND MEXICO.

Mr. Liddall: asked the Chancellor of the Exchequer why, in view of the fact that the ratio of purchase of Mexican products by Britain, as shown by the Board


of Trade Return for the past three months, is as 11 to 3 of United Kingdom products exported to Mexico, an exchange clearing is not being set up to remedy the confiscation of British savings by the Mexican Government?

Sir J. Simon: I would refer my hon. Friend to the reply given to my hon. Friend the Member for Tamworth (Sir J. Mellor) on 19th May, to which I cannot at.present add anything.

BRAZILIAN LOANS (DEFAULT).

Sir Joseph Leech: asked the Chancellor of the Exchequer whether, in order to induce the Brazilian authorities to honour their obligations to British subjects, he will discontinue the protests and consultations with the Council of Foreign Bondholders which have proved themselves to be sterile, and put into operation prohibition of entry of imports from Brazil, as being the only method which will convince Brazil that £80,000,000 worth of British savings entrusted to Brazil cannot be annihilated with impunity?

Sir J. Simon: No, Sir. I do not consider that the prohibition of imports from Brazil would be likely to succeed in achieving the object which my hon. Friend has in mind.

Mr. Jenkins: Did not people who invested this money do so at their own risk, and if the suggestion made in the question were put into operation would it not lead to international complications and even war?

Sir J. Simon: I do not know whether the consequences would be as serious as those suggested at the end of the supplementary question, but, as I have said, I do not think the method proposed is a good one. As to the investments, we shall be glad to do what we can to protect them, but not by this method.

Mr. R. Gibson: Does not the right hon. Gentleman agree that the payment by Brazil of their debts would be rather helped by increasing the imports to this country from Brazil?

Sir J. Simon: The hon. and learned Gentleman has correctly penetrated one of the reasons behind the original answer.

CHINA AND JAPAN.

Mr. Mander: asked the Chancellor of the Exchequer whether he will consider the advisability of guaranteeing a loan for the supply of military material to China on the basis of the precedent set in the case of Turkey and in pursuance of our obligations under the Covenant of the League of Nations?

Sir J. Simon: I would refer the hon. Member to the answer given on 14th June by my hon. Friend the Under-Secretary of State for Foreign Affairs in reply to a question by my hon. and gallant Friend the Member for the Isle of Wight (Captain P. Macdonald).

Mr. Mander: Are there not important British interests at stake here that would justify action on these lines, apart from anything else?

Sir J. Simon: The considerations are known to the hon. Member, and I cannot amplify my answer to-day.

Mr. Sorensen: asked the Prime Minister whether he will propose to the League of Nations the immediate consideration of means by which the economic needs of China and Japan can be assisted through League of Nations action and international agreement at the conclusion of hostilities, or earlier if opportunity offers?

Mr. Butler: The League Assembly at its last session recommended Member States to consider how far they could individually extend aid to China, and the Council at its meeting last May urged Members to do their utmost to give effect to previous recommendations on this subject, and to take into serious and sympathetic consideration requests received from the Chinese Government. Also there has been in existence since 1933 a committee, appointed by the League Council, for technical collaboration with China. No request has been received for economic assistance to Japan through League of Nations action.

Mr. Sorensen: Does the hon. Member realise that the economic factor is one of the most important causes of war, and requires far more initiative for His Majesty's Government to deal with it than they have exhibited up to now, and will he do his best to see that this important factor is kept in mind?

Mr. Butler: As I have already informed the House, the importance of this matter is fully realised by Members of His Majesty's Government.

Mr. Sorensen: Is the hon. Gentleman satisfied that everything possible is being done?

Mr. Butler: Yes, Sir.

Viscountess Astor: Is my hon. Friend aware that the failure of economic cooperation broke the heart of the late Mr. William Graham?

ROAD USERS (TAXATION).

Mr. Day: asked the Chancellor of the Exchequer what have been the sums contributed to the revenue by road users which have been appropriated for general taxation for the three years ended to the last convenient date?

Sir J. Simon: The revenue from hydrocarbon oils used on the roads is estimated in round figures at £40,600,000 in 1935, £43,250,000 in 1936 and £45,500,000 in 1937. Motor vehicle duties retained in the Exchequer and sums transferred from the Road Fund to the Exchequer totalled £9,400,000 in 1935 and £10,500,000 in 1936. In 1937, the full produce of the motor vehicle duties, amounting to £34,600,000, remained in the Exchequer and the expenditure on roads was provided for in Votes of Parliament.

Mr. Day: Does that include all luxury taxation on private motor cars?

ESTATES COMPANIES (TAXATION).

Mr. McGovern: asked the Chancellor of the Exchequer the amount of money invested by the late Duke of Devonshire in the company known as the Chatsworth Estates Company; the amount of money left in this company; the total amount of taxation paid or due; and the amount which would have been paid, or due, if the capital had not been in this company?

Sir J. Simon: No, Sir. I am not prepared to disclose information relating to the estate of an individual taxpayer.

Mr. McGovern: Are we to take it that the right hon. Gentleman is not prepared to divulge evidence which has already been divulged in the Press but

which he himself stated last week he was not prepared to accept? Is he not prepared to correct it, and can he say why there should not be a statement made on an issue of this kind if there is collusion on the part of a Member of the House of Lords to prevent himself paying tax?

Sir J. Simon: It is a very well understood principle, and one which the House will support, that information relating to the estate of an individual should not be made the subject of Question and Answer in the House of Commons. If that rule were departed from, it is obvious that many evils would result.

Mr. Gallacher: On a point of Order. If a question is put on the Order Paper and is passed after consideration, are we not to take it for granted that it is a legitimate question, and is subject to an answer by the Minister responsible?

Mr. Speaker: The Minister has said that it is not the practice to give this information, and it is not obligatory on the Chancellor to give it.

Mr. Davidson: Is the right hon. Gentleman aware of the many questionnaires which are addressed to unemployed working-class men and women?

Mr. Maxton: Does not another question arise here concerning Members of the Government holding directorships?

Mr. McGovern: asked the Chancellor of the Exchequer whether his attention has been drawn to the formation of a company named Shenly Park Estates for the purpose of conveying a private fortune to the heir without giving to the British Exchequer the necessary taxation; and what steps he proposes to take to stop this form of evasion?

Sir J. Simon: I understand that the company to which the hon. Member refers was registered in March of this year. There is nothing to show that the purpose of its formation was such as he indicates. I would remind him that the Finance Bills of recent years contain provisions designed to check loss of taxation through the transference of property to companies.

Mr. McGovern: If this latest estates company formed by Lord Cadman for the same purpose as the estates company of the Duke of Devonshire is to avoid taxation, would it be proper to ask the


Chancellor to divulge any proposals he intends to make to prevent rich men doing the thing that poor men are prevented from doing, and are imprisoned every week for doing in a small way?

Sir J. Simon: I really think that the hon. Gentleman is not stating the matter quite fairly. If he will consult the Finance Act, 1930, he will find in it two elaborate Sections addressed to the very purpose of preventing evasion of taxation by the formation of companies; and no doubt the hon. Gentleman is aware that only last night we added another Clause to the Finance Bill to implement those provisions.

Mr. McGovern: Can the right hon. Gentleman assure me that legislation which has been devised by him in the Finance Bill will prevent any repetition of that practice?

Mr. Garro Jones: Do not these things resolve themselves into a game of hide-and-seek so that when one method of evasion is discovered another is found; and will the right hon. Gentleman realise that this problem will never be solved until he passes a general law making invalid business transactions which are designed to escape taxation?

Mr. McGovern: I intend to raise this matter on the Adjournment.

PROPERTY-INVESTMENT SOCIETIES (RETURNS).

Mr. Bellenger: asked the Financial Secretary to the Treasury how many property-investment societies have failed to send a return for the year ended 3rst December, 1937, to the Registrar of Friendly Societies?

The Financial Secretary to the Treasury (Captain Euan Wallace): Twelve societies have failed to furnish annual returns for 1937. Three other societies sent in returns without the signature of the auditor. These returns have been sent back to the societies for the omission to be rectified.

Mr. Bellenger: In the case of the 12 societies which failed to send in a return, is it proposed to take any action, and, if so, what?

Captain Wallace: In regard to these 12 cases, in three summonses have been issued but not yet heard; in four the registrar has given notice of his intention to cancel the registry; and the other five will be looked into.

Mr. Thorne: Is not the right hon. and gallant Gentleman aware that trade unions are heavily penalised unless they send a return every year to the registrar, and why should not these societies be treated in the same way?

Captain Wallace: If the hon. Member had listened to my reply he would have seen that they are being dealt with.

ESSENTIAL COMMODITIES RESERVES (INSURANCE).

Mr. Lathan: asked the President of the Board of Trade whether steps have been taken to cover by insurance the risks associated with the storage of the essential commodities acquired by the Government, whether those risks have been accepted by the Treasury or with what British insurance companies they have been covered?

Mr. Stanley: The stocks of essential commodities are at present legally the property of the firms who purchased them for the Government and they are insuring them just as if purchased for their own use. When the Essential Commodities Reserves Bill becomes operative, the Board of Trade will be able to pay for the stocks and the question of insuring them when they are Government property is under consideration.

Mr. Lathan: Do I understand that the responsibility for insurance rests upon the private companies, and not upon the Government?

Mr. Stanley: Yes, at the moment, because the stocks are still the property of the private companies. Until the Bill has gone through we cannot pay for them, and until we pay for them they remain the property of the people who purchased them.

Mr. Lathan: Are not the insurance arrangements made under the direction of the Government?

Mr. Stanley: No, while the stocks are their property it is left to them to insure them in the way in which they are accustomed to insure their property.

Colonel Nathan: Do the risks include war risks?

Mr. Stanley: I must have notice of that question.

Oral Answers to Questions — BRITISH ARMY.

AIR DEFENCES, WAR DEPARTMENT ESTABLISHMENTS.

Sir L. Smith: asked the Secretary of State for War whether adequate arrangements have now been made to provide air-raid protection in War Office industrial establishments?

The Secretary of State for War (Mr. Hore-Belisha): Instructions have been issued for the guidance of the heads of War Department establishments in the matter of preparing passive air defence schemes, and an officer has been specially appointed to give advice on this subject.

Sir L. Smith: When any of these arrangements are proceeding will my right hon. Friend consider inviting representatives of industries in this country to see what is being done, so that they may learn something of the details?

Mr. Hore-Belisha: Yes, Sir, I will willingly do that.

RECRUITING DEPOTS (MEDICAL OFFICERS' REMUNERATION).

Mr. Denville: asked the Secretary of State for War whether he has considered the complaints of medical officers attached to recruiting depots as to the insufficiency of their remuneration and of the insecurity of their engagement; and what steps he is taking to meet them?

Mr. Hore-Belisha: No complaints have been received.

ANTI-AIRCRAFT ORGANISATION.

Mr. Mabane: asked the Secretary of State for War what modification of the present anti-aircraft organisation he is contemplating?

Mr. Hore-Belisha: Perhaps I may be allowed to answer this question at the end of Questions.

Later:

Mr. Hore-Belisha: In 1935 the entire responsibility for anti-aircraft defence at home was vested in the Territorial Army. At that time the actual strength of air defence formations in the Territorial Army

was under 2,000 all ranks. On 1st January, 1936, the first anti-aircraft division was formed. Its strength at the beginning of 1936 was 5,20o all ranks. By the beginning of January, 1937, a second anti-aircraft division was formed, its strength being just under 7,000. By the present month of this year the total strength of the two divisions had risen to 43,000.
It is now proposed more than to double this figure. The existing Territorial antiaircraft units, with the addition of others about to be created, will be formed into five divisions instead of two. These five divisions will be under a corps commander with the rank of lieutenant-general. The corps commander will be responsible for training (including administration of his training grant), inspection and personal questions. He will be responsible to the Air Officer Commanding Fighter Command for operations. At the War Office an officer with the status of a Deputy-Chief of the Imperial General Staff and with the rank of lieutenant-general, to be designated Deputy-Chief of the Imperial General Staff (Anti-Aircraft Defence) will be appointed. He will be responsible, through the Chief of the Imperial General Staff, to the Secretary of State for antiaircraft defence, and he will devote his whole time to this important service. Under the Deputy-Chief of the Imperial General Staff (Anti-Aircraft Defence) a new Director of Anti-Aircraft Training and Organisation with the rank of major-general will be appointed.
The purpose of the reorganisation which I have outlined is to secure that undivided attention may be given to every aspect and detail of anti-aircraft defence, and to ensure that this branch of defence shall be given a status commensurate with its rapidly expanding scope and importance.

Mr. Mabane: Can my right hon. Friend indicate roughly the geographical distribution of these five new divisions?

Mr. Hore-Belisha: They will cover all the appropriate areas in the United Kingdom.

Mr. Thorne: Do we understand from the right hon. Gentleman's statement that he has no permanent anti-aircraft batteries at all?

Mr. Hore-Belisha: There are Regular anti-aircraft units, but I was dealign with the Territorial units.

Mr. Mabane: May I put my question more precisely to my right hon. Friend? I intended to ask him where the headquarters of the five divisions were. Of course, I understood that they would be in the United Kingdom.

Mr. Hore-Belisha: The corps commander will take his seat with the fighter commander and he will be commander-in-chief of the fighter command, air-officer commanding.

Mr. Bellenger: In view of the fact that the doubling of these figures probably means the recruiting of another 50,000 men, has the right hon. Gentleman any proposal for the recruitment of so large a number of individuals?

Mr. Hore-Belisha: As I have shown by the figures which I have read to the House, recruiting has proceeded recently with accelerating speed, and we have no reason to doubt that the assistance that has been forthcoming from recognised associations and individuals, some of whom are found in all parts of this House, will achieve the required number.

Sir Archibald Sinclair: Can the right hon. Gentleman tell us whether the guns, instruments and equipment are available for the equipment of these new formations?

Mr. Hore-Belisha: I hope that as and when any additional units are formed they will have their proper quota, as have others already in existence their proper training equipment.

Mr. Lees-Smith: Will this scheme include coast defence?

Mr. Hare-Belisha: No, Sir; it is only anti-aircraft defence.

Mr. Davidson: Can the right hon. Gentleman give any indication whether in Scotland there will be a Scottish Command, as we have in the Army and Territorial Force at present?

Mr. Hore-Belisha: One of the divisions will cover Scotland, and to that extent the answer is "Yes."

Mr. Mander: Will it be in order to ask questions about this new Department?

Mr. Ellis Smith: In view of the fact that our modern anti-aircraft gun is one of the most efficient in the world, is the Minister satisfied that he is going to secure the maximum production in the minimum of time?

Mr. Hore-Belisha: Yes, Sir. I think the production of the gun is quite remarkable. It is in production.

Mr. Leach: Is the Minister satisfied that these elaborate arrangements will fully protect him against the approaching Sandys storm?

ALDERSHOT TATTOO.

Mr. Day: asked the Secretary of State for War the number of persons that visited the military tattoo at Aldershot during the 1938 season, and the particulars of the amounts that charities will receive from same?

Mr. Hore-Belisha: The answer to the first part of the question is about 531,000. I am not yet in a position to answer the second part.

Mr. Day: With reference to the second part, can the Minister say whether the charities also participate in the advertisement revenue?

Mr. Hore-Belisha: They participate in the total sum available.

Mr. Lees-Smith: Can the right hon. Gentleman say what were the total payments made by the public and how many troops were engaged in this entertainment?

Mr. Hore-Belisha: I am not in a position to improvise the answer, but I think I can obtain that information.

COMMISSIONS (UNIVERSITY CANDIDATES).

Colonel Sir Charles MacAndrew: asked the Secretary of State for War whether most seniority is invariably given to those university candidates for comissions who have taken honours degrees?

Mr. Hore-Belisha: No, Sir.

Sir C. MacAndrew: If a candidate for a commission takes his honours degree has he no advantage over a candidate who takes an ordinary degree?

Mr. Hore-Belisha: Yes, he has a certain advantage in regard to whether he obtains a first or second class, but not otherwise. It is too complicated a matter to explain


in answer to a question, but I will send my hon. and gallant Friend the particulars.

OFFICE-WORK 4MECHANISATION).

Mr. Graham White: asked the Secretary of State for War whether the process of mechanising the office-work of his Department in London and in the out stations has been completed?

Mr. Hore-Belisha: The development of organisation, and the expansion of many establishments constantly provide new problems and possibilities for mechanising office work, especially in out stations, and the process of mechanisation of such work is, therefore, a continuous one. Trials are being constantly carried out with a view to ascertaining how far machine methods can be adapted to Army requirements.

RECRUITING POSTERS.

Mr. Mander: asked the Secretary of State for War whether he will consider the advisability of introducing into some of the recruiting posters an appeal to the sentiments widely held in this country associated with the preservation of peace through collective security and mutual assistance in accordance with the ideals and obligations of the Covenant of the League of Nations?

Mr. Hore-Belisha: Posters are technically designed to have the widest possible appeal.

Mr. Mander: Is the Minister aware that there are large numbers of young men in this country to whom an appeal on these lines would be far more effective than would any other?

Mr. Bevan: Is it not a fact that if an appeal were made on the lines suggested by the hon. Member, men would be recruited for the armed forces under false pretences?

Mr. H. G. Williams: Does not my right hon. Friend think that collective security would probably involve us in more wars?

Mr. Mander: Is not the real reason why such an appeal is not made that the Government do not believe in the policy?

ANTI-AIRCRAFT UNITS, SCOTLAND.

Mr. Davidson: asked the Secretary of State for War when the anti-aircraft

units now established in Scotland will have their full complement of 3.7 mobile and 4.5 fixed guns?

Mr. Hore-Belisha: What complement of available guns may be allotted to any particular unit depends upon the plan of defence.

Mr. Davidson: In view of the fact that the Scottish local authorities are interested in the question of defence, surely the Minister's general staff have sufficient technical knowledge to be able to assure the people of Scotland when these units, now established, will be equipped properly for defence purposes?

Mr. Hore-Belisha: Surely the hon. Member realises that no country in the world would publish the kind of information for which he has asked.

Mr. Thurtle: Can the right hon. Gentleman give us an assurance that these anti-aircraft units in Scotland will not be given priority over anti-aircraft units in London?

Mr. Davidson: In view of the thoroughly unsatisfactory answer I beg to give notice that I shall raise the question on the Adjournment.

AFFORESTATION.

Mr. Ellis Smith: asked the right hon. and gallant Member for Rye, as representing the Forestry Commissioners, whether it is intended to initiate any schemes of afforestation or forest workers' holdings in Staffordshire; if so, in what part; is it intended to develop any scheme in the North Staffordshire area; and has a survey of the area been made and any land been acquired?

Colonel Sir George Courthope (Forestry Commissioner): Afforestation has been undertaken by the Forestry Commission at Cannock Chase, Staffordshire, where they have acquired over 5,300 acres of land and have established it forest workers' holdings. The Department have particulars of all suitable areas in the county and although no further acquisitions are in immediate view they are prepared to negotiate for any suitable land which becomes available.

Sir William Jenkins: asked the right hon. and gallant Member for Rye, as representing the Forestry Commissioners,


what number of schemes for planting trees they have established since 1932, giving each year separately, to the latest available date; stating the number of acres of land bought or leased; the number of men employed on each scheme; the number of families established permanently; the number of full-time officials and salaries paid in each grade; and the rates of wages paid to the ordinary employés, with separate particulars for Scotland, England and Wales?

Sir G. Courthope: The information required is contained in the annual reports of the Forestry Commissioners and the Department's annual estimates. To give the information orally would entail reading many pages from these publications. With the permission of the House, therefore, I will refer the hon. Member to these reports and estimates and hand him copies of the latest issues.

NAVAL AND MILITARY PENSIONS AND GRANTS.

Mr. Roland Robinson: asked the Minister of Pensions how many disabled ex-service men received hospital treatment for their disabilities during each of the years 1936 and 1937?

The Minister of Pensions (Mr. Rams-botham): Apart from the cases numbering about 6,000 in mental hospitals, 8,517 officers and men in 1936 and 8,090 in 1937 received treatment in hospitals for their war disabilities.

Mr. R. Robinson: asked the Minister of Pensions in how many cases during 1936 and 1937 disabled ex-service men applying for hospital treatment were informed that it was unnecessary but were subsequently admitted to hospital?

Mr. Ramsbotham: I regret that I have no record of the number of cases of this description.

UNEMPLOYMENT (ASSISTANCE).

Mr. John: asked the Minister of Labour whether he is aware that area officers in the Rhondda are sending unemployed persons who apply for nourishment allowance under the Unemployment Assistance Board's regulation to Pontypridd to be medically examined; and whether he will state the reason for the practice, seeing that each applicant for

nourishment produces a certificate from his or her medical attendant certifying as to the need of nourishment allowance?

The Minister of Labour (Mr. Ernest Brown): I dealt with this matter in my reply on 17th February last to the hon. Member for Rhondda, East (Mr. Mainwaring) when I stated that these arrangements under which certain cases are referred to regional medical officers have been in operation since 1935. The procedure is only used in exceptional cases.

Mr. Bevan: If a medical certificate is sent with the applicant in the first place, is he then sent to a doctor as local medical referee?

Mr. Brown: In a few very exceptional cases.

AERODROME CONSTRUCTION, ST. ATHANS.

Mr. John: asked the Secretary of State for Air the number of contractors engaged in constructing the new aerodrome works at St. Athans, the number of workmen engaged and the number of hours worked per day?

The Under-Secretary of State for Air (Captain Harold Balfour): Fifteen contractors, including sub-contractors, are at present engaged in the construction work referred to, and on 24th June, 3,177 workmen were employed. The hours at present being worked by the majority of the workmen are 10½ on Monday to Thursday inclusive, 8½ on Friday and four on Saturday.

Mr. John: asked the Secretary of State for Air whether he is aware of the growing practice adopted by the contractors at St. Athans of dismissing their workmen without notice on the plea that parts of the constructional work are not sufficiently advanced, and that whilst these workmen are sent to the Employment Exchange to obtain their cards others are employed at the works; and will he state the number so dismissed in the last eight weeks?

Captain Balfour: I am informed that the practice of contractors and subcontractors is to give workmen the notice or pay in lieu of notice which is customary in work on constructional contracts. In such constructional work being


carried out by a considerable number of contractors, it is difficult fully to coordinate the demands for new, and the release of existing, workmen from the very large number of men employed. In the case of skilled labour every man whose services are no longer required on a particular section of the work is passed through the temporary employment office established on the site for consideration for vacancies arising on other sections of the work, and by this means continuity of employment has been ensured for the bulk of skilled men. The case of unskilled men which involves larger numbers is more difficult and this system cannot be worked as systematically as that of skilled personnel. It may be that men have been discharged from a particular operation on one part of the site co-incident with the engagement of other labour for a different operation on another part. The names of men who have been previously employed and whose discharge is not due either to unsuitability or other cause are re-submitted through the temporary employment office with the result that the majority of these discharged men get back to work after a short period. The total number of men paid off during the last eight weeks is about 400 and the number engaged about 900, many of whom were found from among the 400 who had been discharged. If the hon. Member has specific cases in mind perhaps he will let me have particulars.

Mr. John: Is it not possible to establish a similar policy for unskilled men as for skilled? A large number of men are employed? They are employed for four or five days, they pay 9s. for bus fares, they buy working gear, and are dismissed in three or four days without any chance of recovering the expense.

Captain Balfour: As I explained in my reply, there is considerable difficulty in dealign with the large number of unskilled men as compared with the skilled men, but I am sure that my right hon. Friend desires to see the Employment Exchanges used to the utmost in order to facilitate the re-employment at once of any unskilled men who have been turned off. If the hon. Member will bring me any instances I will look into them.

Mr. Jenkins: I gather from the reply that 400 men were dismissed and 900

were engaged during the same period. Surely it would have been easy so to coordinate the proceedings that these 400 men might have continued in their employment?

Captain Balfour: Among the 900 are included 400 who have been turned off by sub-contractors. It is always impossible to deal with the matter exactly, but we keep in touch as far as we can.

Mr. Bevan: Is it not obvious that a clearing house for unskilled workers is far easier than for skilled men, and that the Minister's answer is, therefore, not reasonable at all?

Captain Balfour: No, a clearing house for unskilled men is not easier, because the number of them is much larger than in the case of the skilled men, particularly when 15 contractors or sub-contractors may be taking on or turning off men, according to the particular time at which they are starting work.

AERIAL WARFARE.

Mr. Sorensen: asked the Prime Minister whether he is now in a position to make a statement as to whether His Majesty's Government are prepared to initiate immediate action respecting the international abolition of aerial warfare?

The Prime Minister: I would refer the hon. Member to the statement I made in the House on 2rst June, in which I explained that His Majesty's Government are already engaged in a survey of the questions at issue.

Mr. Sorensen: Is the right hon. Gentleman not aware that when I asked a similar question he referred me to the Debate which was to follow, and is it not a fact that no reference was made in that Debate to the major part of that question?

The Prime Minister: I do not know whether that was the case, but I think that the answer which I gave to the hon. Member gave all the information I could.

Mr. Sorensen: May I take it that the right hon. Gentleman will take no initiative in this matter?

The Prime Minister: Not until we have completed our survey.

Mr. Mander: Is not action the last thing in which the Government are interested?

NATIONAL HEALTH INSURANCE.

Major Macnamara: asked the Minister of Health why the Ophthalmic Benefit Approved Committee, which is a statutory committee, do not give their names to bona fide persons who have to appear before them or have to have dealigns with them; and whether he will state their names to the House?

The Parliamentary Secretary to the Ministry of Health (Mr. Bernays): My right hon. Friend is not aware that the Ophthalmic Benefit Approved Committee have declined or would decline to give the names of the members to any persons with whom they have official relations. The committee consists of 14 representatives of approved societies and an equal number of opticians, with the hon. Member for the Newton division of Lancaster (Sir R. Young) as chairman. There are also two official observers with no voting power, one from the Ministry of Health and one from the Department of Health for Scotland. With my hon. and gallant Friend's permission, I will give the names of the members of the committee in the OFFICIAL REPORT.

Following are the names:

COMPOSITION OF THE OPHTHALMIC BENEFIT APPROVED COMMITTEE.

Chairman: Sir Robert Young, O.B.E., M.P.

Approved Society Representatives:

National Conference of Friendly Societies: Mr. S. L. Duff, C.B.E., Mr. H. W. Townley.

National Conference of Industrial Assurance Approved Societies: Mr. C. G. Izard, Mr. J. S. Pike.

National Federation of Rural Approved Societies: Mr. G. C. Bowers.

National Association of Trade Union Approved Societies: Mr. G. W. Canter.

National Federation of Employees

Approved Societies: Mr. H. Lesser.

Association of Deposit Societies: Mr. C. Tuckfield.

National Federation of Dividing Societies: Mr. F. G. Harris.

National Union of Holloway Friendly Societies: Mr. P. Rockliff.

Scottish Association of Friendly and Approved Societies: Mr. T. William Wallace.

Association of Welsh Approved Societies: Mr. J. G. Lewis.

Chairman of the Approved Societies Consultative Council for England and Wales: Mr. C. A. Bamford.

Chairman of the Scottish Approved Societies Consultative Council: Mr. J. Webster.

Optical Representatives:

Joint Council of Qualified Opticians: Mr. W. B. Barker (British Optical Association).

Major W. H. Champness (Worshipful Company of Spectacle Makers).

Mr. G. E. Houghton (Institute of Ophthalmic Opticians).

Mr. J. H. Hayes (Joint Council of Qualified Opticians).

Mr. T. J. H. Young (Optician Resident in Scotland).

Mr. P. Randell (Optician Resident in Wales).

National Association of Opticians: Mr. L. Moreton Parry.

Institute of Chemist-Opticians: Mr. J. J. Laws.

Ophthalmic Supplies Limited: Mr. J. W. Bowen.

Association of Dispensing Opticians, Limited: Mr. J. R. Howard.

Scottish Association of Opticians: Mr. D. L. Veitch.

Association of Wholesale and Manufacturing Opticians: Mr. E. T. Cornwell, Mr. F. H. Wheway.

Unattached Opticians: Mr. I. G. Aitchison.

Major Macnamara: asked the Minister of Health whether he is aware that Messrs. Jameson and Company, who make spectacle frames, were required by the technical sub-committee of the ophthalmic benefit committee, whose subcommittee's seven members include three competitors of Messrs. Jameson and Company, to submit, under the new regulations, their spectacle frames to a test by a competitor of Messrs. Jameson and Company; that the latter refused, but suggested an independent test by a Government Department, which was refused; and whether he will intervene to protect the interests of small manufacturers, allow the independent test, and grant Messrs. Jameson and Company a continuation of their licence beyond 3oth June until the matter is settled?

Mr. Bernays: My right hon. Friend is in communication with the Ophthalmic Benefit Approved Committee in this


matter and will inform my hon. and gallant Friend of the result. My right hon. Friend is hopeful that the committee will now be able to find some way of arranging for a test by an authority to which Messrs. Jameson's could not take exception.

Major Macnamara: asked the Minister of Health why his Department has neither asknowledged nor replied to a letter of 4th June, and a subsequent telegram, from Messrs. Jameson and Company, a firm who have been manufacturing spectacle frames for some time?

Mr. Bernays: My right hon. Friend regrets that owing to an unfortunate misunderstanding the communications to which my hon. and gallant Friend refers, instead of being dealt with by his Department, were forwarded to the Ophthalmic Benefit Approved Committee. A reply has now been sent to Messrs. Jameson.

SPAIN.

Mr. Attlee(by Private Notice): asked the Prime Minister whether the Government have now received any reply to their protest to the Spanish Insurgent Authorities regarding the bombing of British ships?

The Prime Minister: No, Sir. But a further communication has been sent to Sir Robert Hodgson instructing him to press the Burgos authorities for a reply forthwith, in order that he may return with it without delay.

Mr. Attlee: Is any time limit laid down? In view of the constant sinking of our ships, is it not a serious matter when protests are made and no reply is received?

The Prime Minister: No definite date has been laid down, but the right hon. Gentleman has heard the terms of the answer as I have read it.

Mr. Attlee: If I put a question down on Thursday, does the Prime Minister hope to have a reply by then?

The Prime Minister: indicated assent.

Mr. Macquisten: Are these shipowners who sent out ships for the purpose of private gain—[Interruption.]

BUSINESS OF THE HOUSE.

Mr. Attlee: May I ask the Prime Minister two questions on business? The first is, what will be the business for Friday; and the second is, whether he has any statement to make as to the Motion standing in the name of the hon. Member for Norwood (Mr. Sandys)—

["That a Select Committee of this House he appointed to inquire into the substance of the statements made on 27th June in this House by the hon. Member for Norwood and the action of the Ministers concerned, and generally on the question of the applicability of the Official Secrets Act to Members of this House in the discharge of their Parliamentary duties."]

The Prime Minister: The business on Friday will be: Supply, Committee, 14th Allotted Day (First Part). The Estimate for the Forestry Commission will be considered.
In reply to the right hon. Gentleman's second question, the Government propose to set up a Select Committee to inquire into the matter, and the terms of reference will be those contained in the Motion standing on the Order Paper in the name of my hon. Friend the Member for Norwood (Mr. Sandys). I propose that this Committee should consist of 10 members, and discussions will take place immediately through the usual channels as to the constitution of the Committee. The necessary Motion will be tabled as soon as possible. Provided that the Committee stage of the Finance Bill is concluded to-night, I hope that an opportunity will be found to debate the Motion on Thursday. I will make a further statement to-morrow.

Mr. Attlee: May I take it that, in the discussion on the Motion, the Prime Minister will make a statement as to what the attitude of the Government is with regard to the Official Secrets Act and Members of this House; because, if this Committee is to be set up, we may for some time be uncertain, unless we have an indication from the Prime Minister, what is the practice of the Government in this matter? May I ask, also, whether a statement will be made by the Secretary of State for War?

The Prime Minister: With regard to the right hon. Gentleman's first question, I think I should like to consider that; he did not give me notice of it. As to his


second question, I understand that my right hon. Friend the Secretary of State for War is extremely anxious to make a statement at the earliest possible opportunity.

BILL PRESENTED.

RIDING ESTABLISHMENTS (REGISTRATION AND INSPECTION) BILL,

"to provide for the registration and inspection of riding establishments, and for other purposes connected therewith," presented by Captain Heilgers; supported by Sir Edward Ruggles-Brise, Mr. Hopkin, Mr. Tree, Mr. Graham White, Sir Thomas Cook, Sir Reginald Dorman-Smith, Mr. Ross Taylor, Colonel Clarke, Mr. Raikes, Mr. Goldie, and Wing-Commander Wright; to be read a Second time upon Tuesday next, and to be printed. [Bill 197.]

ALIENS RESTRICTION (BLASPHEMY).

Captain Ramsay: I beg to move,
That leave be given to bring in a Bill to prevent the participation by aliens in assemblies for the purpose of propagating blasphemous or atheistic doctrines or in other activities calculated to interfere with the established religious institutions of Great Britain, to amend the Aliens Restriction (Amendment) Act, 1919, and for other purposes connected therewith.
May I say at the outset to hon. Members on both sides of the House that there is no intention of any sort whatever in my mind to affect or criticise the right of British citizens to think as they think fit as to whether religious principles shall be held or not? I wish to make that quite clear. If we lived in the days of those Victorian agnostic free-thought societies the details of which were circulated to us the other day, this Bill would certainly not be moved by me. My object in moving it is to make sure that these societies, with their respectable associations, shall not be used as a vehicle for Communistic or revolutionary propaganda. Since these organisations were founded, certain important events have taken place which must command the interest of all hon. Members on both sides of the House. The first was the launching by Moscow of the revolutionary campaign against religion. Then followed, in 1925, the formation of the International Proletarian Freethinkers, with the same

directorate as the Militant Godless; the attack carried on for 11 years by these Proletarian Freethinkers on those respectable Victorian organisations; and their final merger two years ago at Prag. Hon. Gentlemen on the other side of the House may say, in the first place, that this propaganda will still be of the free thought nature, but I have here Mr. Jaroslaysky's handbook on the subject, in which he says—and, as he is president of the Militant Godless, he speaks with supreme authority on the point—
The revolutionary proletariat is not concerned with a merely paper war of the old style of Free-thought … it is an integral part of the revolutionary proletarian class struggle.
If hon. Members on the other side of the House presume that at these congresses, when attended by members of this body, they will stick to atheism or religion, let me again quote from Mr. Jaroslaysky's handbook:
Proletarian freethinking as cultivated by the League of the Godless is, on the contrary, essentially part and parcel of the militant workers' class struggle; basically political and revolutionary from the start.
I think I have shown that, in a merger of societies containing men with these beliefs, we have a vehicle and a facade for aliens coming over to this country, nominally to discuss religion, but actually as agents of an organisation to promote revolution. We are indebted to our Socialist friends for a book called "The Communist Solar System." This so-called Freethinkers' Union should be included in that book as the latest addition to the United Front. Those respectable Victorian societies had no Sir Walter Citrine to stand up for them and warn them of the wrath to come. An 11-years' battle was kept up between the proletarian freethinkers and our bourgeois societies, and finally it and they came to an end at Prag, when they gave up their individuality and were merged in the new joint Union of Freethinkers. I will give an idea of the atmosphere that prevailed at Prag when these respectable British citizens arrived, as sheep for the slaughter. I quote from "International Press Correspondence," Volume 16, page 21, of 2nd May, 1936:
The prolonged, frenzied applause which greeted the Soviet Delegation made it manifest that the freethinkers' organisation of the 12 countries that were represented at this congress recognised in the Soviet Union a


country of Socialism, the chief support of their effort on behalf of freedom and on behalf of freedom among the people of the world.
The next page shows how the recalcitrants were dealt with, and significantly concludes:
It can, however, be confidently stated that all these efforts at disruption were fruitless.
The next page described the speeches of the Soviet delegation, in which they hardly touch on the question of religion at all but deal with agricultural collectivism, the Stakhanov movement, downwards through the whole range of politics. The final quotation is as follows:
Amalgamation is concluded. Amalgamation is not an end in itself but only a means to an end.
I am glad from the cheers of hon. Members opposite to know that they concur in that statement: they may not like the conclusion, which was:
In order to divest the free-thought movement of its sectarian character and bring it into service for the world struggle.
With prototypes such as Lenin and Yaroslaysky we know what that world struggle means—Red revolution; and it is against that I wish to warn my friends on both sides of the House.
Now we come to the present congress, which is to take place in this country. I will quote from a Russian anti-religious paper and the quotation is vouched for by three reputable organisations, including the British Bible Union. I will give the actual words of Mr. Newman Watts of the last-named society:
At the end of September last I received from the Agence d'Information de l'Orient of Paris a bulletin regarding the International Godless Congress in London. I have since seen the actual issue of the Antireligioznik of 27th July which was worded thus: 'The proposition concerning the organisation of the Godless Congress in London is accepted. (2) In case the English Government should forbid the organisation of the Congress, it will take place in Holland or Belgium. (3) The Soviet Russian Organisation of the Godless spends 150,000 roubles on the expenses of the Congress'.
If some people should say that we are going to give them publicity by raising this matter, I will reply that we have only to look at the names of the people who are organising this congress to realise that they need no publicity; they can get all they want. What we are going to give them is just the publicity they

do not want. And that is of two kinds: firstly, to warn the innocents inside these organisations of who is now running them; and, secondly, to warn organised Christianity of the real nature of this attack. If my hon. Friends are going to reply on the basis of free speech, may I suggest that they have to make a reply on the basis of free speech for aliens who are members or are likely to be members of this revolutionary organisation. One final extract from a man who has been a Protestant speaker in this country for 40 years. He writes that he has been speaking on the United Christian Front platform for 13 months and that his meetings have been broken up time and again and that this has been nearly always done by aliens. It is to prevent further aliens of just that type from coming into the country that I move this Motion.

Mr. Thorne: On a point of Order. During the whole time the hon. and gallant Member has been speaking he has not said a single word about the Bill he wishes to introduce.

Mr. Speaker: I noticed the same thing myself.

Captain Ramsay: I started by quoting the first two lines of my Motion and did not quote any more as I wanted to make the best use of my time, and it seemed to me that the Notice on the Order Paper made the matter sufficiently clear.

Mr. Edmund Harvey: It is out of no lack of appreciation of the sincerity of the hon. and gallant Member that I ask the House to refuse leave to bring in this Bill, because I am convinced that the Bill is the wrong way to attempt to deal with the evils that the hon. and gallant Member seeks to meet. The method of the Bill is one which history has shown to be ineffective, and it is also profoundly at variance with the great tradition of religious liberty, which is one of our most precious heritages.

Sir William Davison: The Bill deals not with religious liberty but with blasphemy.

Mr. Harvey: I will deal with that point later, if I may. I repeat that this is a wrong way to deal with the matter. Those of us who venture to approach this problem as trying to be Christians have no higher authority than the teaching in the Gospel of the Parable of the Tares.


We know that in that Parable the disciples were taught that the attempt to root up the tares growing among the wheat was a mistaken one; tares and wheat were to be left to grow together.

Mr. Wise: Are you not forgetting that the tares were burnt?

Mr. Harvey: Not by men, but at the consummation of the age. Men were not to interfere with the growing of the tares. The wisdom of that, the insight of it, has been proved again and again in history. The course of history, I think, confirms the view that I have ventured to take. At the beginning of the Christian Church the earliest missionaries of Christianity, coming from Asia, coming from another country to Europe, were greeted in Thessalonica by violent opposition and an angry mob went to the magistrates and complained that:
these that have turned the world upside down are come hither also.
We get almost an echo of some of the arguments of the hon. and gallant Member. These early Christians were known by their opponents as Atheists; they were believed to be Atheists; they were regarded as the enemies of the human race.
If we look at the history of our own country we find that aliens came in, to quote the Motion of the hon. and gallant Member, to further "activities calculated to interfere with the established religious institutions of the country." St. Augustine of Canterbury was an alien. St. Paulinus of York, when he went to King Edwin, was an alien coming to upset the religious institutions of the country. I am sure that the hon. and gallant Member will not consider that St. Augustine and St. Paulinus were mistaken in their mission or that their work was not blessed. Their weapon was the weapon of truth. I maintain that truth needs no

other shield or weapon than itself. Whether it be political error or religious error, the right way to deal with it is by the weapons of argument and appeals to the highest. The only safeguard that truth needs is the light in which and by which it lives.

Some of the darkest pages in the history of this House have been pages where we have tried as a House of Commons to go contrary to that spirit. Go back 300 years and think of the time when a Puritan House of Commons condemned for blasphemy a Quaker whose tongue was bored with a red hot iron and whose forehead was branded. I think that the House then dishonoured itself more than its victim. Go back some 50 years, and think of how the House shut out from its membership one whom they regarded as an Atheist, some perhaps as a blasphemer, and when he lay dying the House expunged from its Minutes the record of what it had done. We do not want to go back to that sort of thing. We want to remember rather that we are the guardians of the spirit which John Milton expressed in his noblest prose work. We need to remember his words to-day:
Give me the liberty to know, to utter and to argue freely according to conscience, above all liberties.

That is a liberty which we ought to be proud and glad to share with men of every other nation.

Question put,
That leave be given to bring in a Bill to prevent the participation by aliens in assemblies for the purpose of propagating blasphemous or atheistic doctrines or in other activities calculated to interfere with the established religious institutions of Great Britain, to amend the Aliens Restriction (Amendment) Act, 1919, and for other purposes connected therewith.

The House divided: Ayes, 165; Noes, 134.

Division No. 251]
NOES
[4.13 p.m.


Acland-Troyte, Lt.-Col. G. J.
Brown, Col. D. C. (Hexham)
Cooks, J. D. (Hammersmith, S.)


Allen, Col. J. Sandeman (B'knhead)
Brown, Brig.-Gen. H. C. (Newbury)
Cooper, Rt. Hn. T. M. (E'nburgh, W.)


Anderson, Rt. Hn. Sir J. (So'h Univ's)
Browne, A. C. (Belfast, W.)
Croft, Brig.-Gen. Sir H. Page


Anstruther-Gray, W. J.
Bull, B. B.
Crooke, Sir J. Smedley


Apsley, Lord
Burton, Col. H. W.
Cross, R. H.


Asks, Sir R. W.
Carver, Major W. H.
Crossley, A. C.


Baldwin-Webb, Col. J.
Cassells, T.
Crowder, J. F. E.


Balfour, Capt. H. H. (Isle of Thanet)
Cayzer, Sir C. W. (City of Cheater)
Davidson, Viscountess


Barrie, Sir C. C.
Cayzer, Sir H. R. (Portsmouth, S.)
Davison, Sir W. H.


Baxter, A. Beverley
Channon, H.
Dawson, Sir P.


Beamish, Rear-Admiral T. P. H.
Chapman, Sir S. (Edinburgh, S.)
De Chair, S. S.


Beaumont, Hon. R. E. B. (Pertsm'h)
Chorlton, A. E. L.
De la Bère, R.


Bennett, Sir E. N.
Christie, J. A.
Despencer-Robertson, Major J. A. F.


Blair, Sir R.
Clarry, Sir Reginald
Doland, G. F.


Bossom, A. C.
Cobb, Captain E. C. (Preston)
Donner, P. W.


Boulton, W. W.
Conant, Captain R. J. E.
Dorman-Smith, Maior Sir R. H.


Briscoe, Capt. R. G.
Cook, Sir T. R. A. M. (Norfolk, N.)
Drewe, C.




Duckworth, Arthur (Shrewsbury)
Lipson, D. L.
Russell, S. H. M. (Darwen)


Duckworth, W. R. (Moss Side)
Logan, D. G.
Salmon, Sir I.


Edge, Sir W.
MacAndrew, Colonel Sir C. G.
Samuel, M. R. A.


Emmott, C. E. G. C.
Macdonald, Capt. P. (Isle of Wight)
Sandeman, Sir N. S.


Errington, E.
McEwen, Capt. J. H. F.
Scott, Lord William


Evans, Capt. A. (Cardiff, S.)
McKie, J. H.
Selley, H. R.


Fox, Sir G. W. G.
Macnamara, Major J. R. J.
Shaw, Captain W. T. (Forfar)


Gibson, R. (Greenock)
Makins, Brigadier-General Sir Ernest
Shepperson, Sir E. W.


Gledhill, G.
Marsden, Commander A.
Sinclair, Col. T. (Queen's U. B'If'st)


Graham, Captain A. C. (Wirral)
Maxwell, Hon. S. A.
Smiles, Lieut.-Colonel Sir W. D.


Grant-Ferris, R.
Mayhew, Lt.-Col. J.
Smith, Sir Louis (Hallam)


Gretton, Col. Rt. Hon. J.
Moller, Sir R. J. (Mitcham)
Somerville, A. A. (Windsor)


Hambro, A. V.
Mellor, Sir J. S. P. (Tamworth)
Southby, Commander Sir A. R. J.


Hannah, I. C.
Mills, Sir F. (Layton, E.)
Stourton, Major Hon. J. J.


Hannon, Sir P. J. H.
Mills, Major J. D. (New Forest)
Strauss, E. A. (Southwark, N.)


Harbord, A.
Moore, Lieut.-Col. Sir T. C. R.
Strauss, H. G. (Norwich)


Haslam, Henry (Horneastle)
Moreing, A. C.
Sueter, Rear-Admiral Sir M. F.


Haslam, Sir J. (Bolton)
Morris, O. T. (Cardiff, E.)
Tasker, Sir R. I.


Heilgers, Captain F. F. A.
Morris-Jones, Sir Henry
Tate, Mavis C.


Hepworth, J.
Morrison, Rt. Hon. W. S. (Cirencester)
Taylor, C. S. (Eastbourne)


Higgs, W. F.
Munro, P.
Taylor, Vice-Adm. E. A. (Padd., S.)


Holdsworth, H.
Nall, Sir J.
Thomson, Sir J. D. W.


Horsbrugh, Florence
Petherick, M.
Thorneycroft, G. E. P.


Howitt, Dr. A. B.
Ponsonby, Col. C. E.
Titchfield, Marquess of


Hudson, Capt. A. U. M. (Hack., N.)
Power, Sir J. C.
Touche, G. C.


Hunter, T.
Radford, E. A.
Turton, R. H.


Hurd, Sir P. A.
Ramsbotham, H.
Ward, Lieut.-Col. Sir A. L. (Hull)


Keeling, E. H.
Rankin, Sir R.
Ward, Irene M. B. (Wallsend)


Kerr, Colonel C. I. (Montrose)
Rayner, Major R. H.
Wardlaw-Milne, Sir J. S.


Kerr, H. W. (Oldham)
Reed, A. C. (Exeter)
Waterhouse, Captain C.


Kerr, J. Graham (Scottish Univs.)
Reed, Sir H. S. (Aylesbury)
Watt, Major G. S. Harvie


Keyes, Admiral of the Fleet Sir R.
Reid, W. Allan (Derby)
Wells, Sir Sydney


Lamb, Sir J. Q.
Rickards, G. W. (Skipton)
Whiteley, Major J. P. (Buckingham)


Lambert, Rt. Hon. G.
Robinson, J. R. (Blackpool)
Williams, H. G. (Croydon, S.)


Latham, Sir P.
Ross Taylor, W. (Woodbridge)
Windsor-Clive, Lieut.-Colonel G.


Law, R. K. (Hull, S.W.)
Rowlands, G.
Wise, A. R.


Leech, Sir J. W.
Royds, Admiral Sir P. M. R.



Leigh, Sir J.
Ruggles-Brise, Colonel Sir E. A.
TELLERS FOR THE AYES.


Liddall, W. S.
Russell, Sir Alexander
Captain Ramsay and Mr.




Denville.




NOES


Acland, R. T. D. (Barnstaple)
Hall, G. H. (Aberdare)
Muff, G.


Adams, D. (Consett)
Hardie, Agnes
Naylor, T. E.


Agnew, Lieut.-Comdr. P. G.
Harris, Sir P. A.
Nioolson, Hon. H. G.


Alexander, Rt. Hon. A. V. (H'Isbr.)
Hayday, A.
Noel-Baker, P. J.


Ammon, C. G.
Henderson, A. (Kingswinford)
Palign, W.


Asshaton, R.
Henderson, J. (Ardwiek)
Parker, J.


Astor, Viscountess (Plymouth, Sutton)
Henderson, T. (Tradeston)
Parkinson, J. A.


Attlee, Rt. Hon. C. R.
Hills, A. (Pontefract)
Pearson, A.


Banfield, J. W.
Hopkin, D.
Poole, C. C.


Barnes, A. J.
Jenkins, Sir W. (Neath)
Pritt, D. N.


Batey, J.
John, W.
Richards, R. (Wrexham)


Benn, Rt. Hon. W. W.
Johnston, Rt. Hon. T.
Ridley, G


Bevan, A.
Jones, A. C. (Shipley)
Riley, B.


Burke, W. A.
Jones, Sir H. Haydn (Merioneth)
Ritson, J.


Cartland, J. R. H.
Jones, Morgan (Caerphilly)
Roberts, Rt. Hon. F. O. (W. Brom.)


Charleton, H. C.
Kelly, W. T.
Roberts, W. (Cumberland, N.)


Chafer, D.
Kennedy, Rt. Hon. T.
Rothschild, J. A. de


Cluse, W. S.
Kirkwood, D.
Russell, R. J. (Eddisbury)


Clynes, Rt. Hon. J. R.
Lansbury, Rt. Hon. G.
Salter, Dr. A. (Bermondsey)


Collindridge, F.
Lathan, G.
Salter, Sir J. Arthur (Oxford U.)


Courthope, Col. Rt. Hon. Sir G. L.
Lawson, J. J.
Seely, Sir H. M.


Cove, W. G.
Leach, W.
Sexton, T. M.


Culverwelf, C. T.
Leonard, W.
Short, A.


Daggar, G.
Levy, T.
Simon, Rt. Hon. Sir J. A.


Davidson, J. J. (Maryhill)
Lunn, W.
Smith, Ben (Rotherhithe)


Davies, R. J. (Westhoughton)
Lyons, A. M.
Smith, E. (Stoke)


Day, H.
Mebane, W. (Huddersfield)
Smith, Rt. Hon. H. B. Lees- (K'ly)


Debbie, W.
McEntee, V. La T.
Smith, T. (Normanton)


Duggan, H. J.
McGhee, H. G.
Sorensen, R. W.


Dunn, E. (Rather Valley)
McGovern, J.
Stewart, W. J. (H'ght'n-le-Sp'ng)


Ede, J. C.
Maclay, Hon. J. P.
Strauss, G. R. (Lambeth, N.)


Edwards, A. (Middlesbrough E.)
Maclean, N.
Summerskill, Dr. Edith


Edwards, Sir C. (Bedwellty)
MacMillan, M. (Western Isles)
Thorne, W.


Gallagher, W.
Maitland, A.
Thurtle, E.


Gardner, B. W.
Mander, G. la M.
Tinker, J. J.


Graham, D. M. (Hamilton)
Marklew, E.
Tomlinson, G.


Green, W. H. (Deptford)
Marshall, F.
Viant, S. P.


Greenwood, Rt. Hon. A.
Mothers, G.
Walker, J.


Griffiths, J. (Llanelly)
Maxton, J.
Watson, W. McL.


Groves, T. E.
Montague, F.
Wedgwood, Rt. Hon. J. G


Guest, Hon. I. (Brecon and Radnor)
Morrison, G. A. (Scottish Univ's.)
Welsh, J. C.


Guest, Dr. L. H. (Islington, N.)
Morrison, R. C. (Tottenham, N.)
Westwood, J.







Whiteley, W. (Blaydon)
Windsor, W. (Hull, C.)
TELLERS FOR THE NOES.—


Wilkinson, Ellen
Woods G. S. (Finsbury)
Mr. Edmund Harvey and Mr.


Williams, D. (Swansea, E.)
Young, Sir R. (Newton)
Benson.


Williams, T. (Don Valley)

Bill ordered to be brought in by Captain Ramsay, Sir William Davison, and Colonel Sandeman Allen.

ALIENS RESTRICTION (BLASPHEMY) BILL,

"to prevent the participation by aliens in assemblies for the purpose of propagating blasphemous or atheistic doctrines or in other activities calculated to interfere with the established religious institutions of Great Britain, to amend the Aliens Restriction (Amendment) Act, 1919, and for other purposes connected therewith," presented accordingly, and read the First time; to be read a Second time upon Thursday, and to be printed. [Bill 198.]

LOCAL GOVERNMENT (HOURS OF POLL) BILL.

Reported, with Amendments, from Standing Committee B.

Bill, as amended (in the Standing Committee), to be considered upon Thursday and to be printed. [Bill 196.]

Minutes of Proceedings to be printed. [No. 144.]

BILLS REPORTED.

MINISTRY OF HEALTH PROVISIONAL ORDER (BUCKS WATER BOARD) BILL.

Reported, without Amendment, from the Committee on Unopposed Bills; to be read the Third time To-morrow.

MINISTRY OF HEALTH PROVISIONAL ORDER (CHURCH STRETTON) BILL.

Reported, without Amendment, from the Committee on Unopposed Bills; to be read the Third time To-morrow.

MINISTRY OF HEALTH PROVISIONAL ORDER (CIRENCESTER) BILL.

Reported, with Amendments, from the Committee on Unopposed Bills.

Bill, as amended, to be considered Tomorrow.

MINISTRY OF HEALTH PROVISIONAL ORDER (HORSFORTH) BILL.

Reported, without Amendment, from the Committee on Unopposed Bills; to be read the Third time To-morrow.

MINISTRY OF HEALTH PROVISIONAL ORDER (LLANDRINDOD WELLS) BILL.

Reported, without Amendment, from the Committee on Unopposed Bills; to be read the Third time To-morrow.

MINISTRY OF HEALTH PROVISIONAL ORDER (RAWMARSH) BILL.

Reported, without Amendment, from the Committee on Unopposed Bills; to be read the Third time To-morrow.

MINISTRY OF HEALTH PROVISIONAL ORDER (WATH UPON DEARNE) BILL.

Reported, with Amendments, from the Committee on Unopposed Bills.

Bill, as amended, to be considered Tomorrow.

WEST HARTLEPOOL CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.

Reported, without Amendment, from the Committee on Unopposed Bills; to be read the Third time To-morrow.

MESSAGE FROM THE LORDS.

That they have agreed to,—

Swinton and Pendlebury Corporation Bill,

Redcar Corporation Bill,

London and North Eastern Railway Bill,

Southern Railway Bill, with Amendments.

That they have passed a Bill, intituled, "An Act to vary the limitations and trusts of the Will dated the 28th day of February, 1923, and the First Codicil thereto dated the 15th day of January, 1924, both proved in the Manchester District Probate Registry on the nth day of January, 1927, of Reginald Arthur Tatton, late of Cuerden Hall in the County of Lancaster." [Tatton Estate Bill [Lords.]

TATTON ESTATE BILL [Lords].

Read the First time; and referred to the Examiners of Petitions for Private Bills.

Orders of the Day — FINANCE BILL.

Considered in Committee [Progress, 27th June].

[Captain BOURNE in the Chair.]

NEW CLAUSE.—(Repeal of customs duties on foodstuffs and Import Duties Act not to apply to foodstuffs.)

As from the first day of September, nineteen hundred and thirty-eight, customs duties chargeable upon foodstuffs imported for human consumption under the provisions of the Import Duties Act, 1932, or the Ottawa Agreements Act, 1932, shall cease to be chargeable, and the provisions of the first-mentioned Act shall be deemed not to authorise the imposition of customs duties upon such foodstuffs.—[Mr. A. V. Alexander.]

Brought up, and read the First time.

4.23 p.m.

Mr. A. V. Alexander: I beg to move, "That the Clause be read a Second time."
We have just, I think lamentably, passed the First Reading of a Measure to restrict liberty. This is an attempt from this side of the Committee to free the consumers of this country from the shameful restriction which is at present put upon their purchasing power, and which is helping to keep such a large number of people below what is a proper standard of life. This Clause is two-fold in its purpose. It asks for the repeal of the food Customs Duties under the Import Duties Act and the Ottawa Agreements Act and it also asks the Committee to agree that in future the Import Duties Act shall not be used for authorising the imposition of new food duties.
Since 1931 the House of Commons has witnessed a very great revolution in regard to taxation on food. I do not know whether the Chancellor of the Exchequer is likely to answer the case which is put for this Clause, but if he does I shall be very interested to hear how he reconciles the present position of himself, as the principal holder of the keys of the power to impose food taxation, with all his lifelong work for the free breakfast table for the people. The fact is that as a result of this revolution we are labouring to-day under the effect of duties imposed under the Ottawa Agreements Act upon wheat, butter, eggs, condensed milk, fruit and other things, and under the Import Duties

Act we are being taxed in respect of potatoes, tomatoes, fruit, poultry, vegetables, and so on. I am unable to make any specific comment upon another important duty which is operating to-day, because it was passed under a separate Act. I refer to the duty on meat. I shall not be able to argue about that particular duty. All I can say is that all the duties I have mentioned are in addition to £5,000,000 on the people's meat.
Recently the President of the Board of Trade gave a most gloomy view of the trade outlook. If he is found to be a true prophet, we must expect a continuous increase in unemployment and a consequent decline in our national standard of living unless the Government take some effective steps to check that tendency. It is imperative, therefore, in our view, that some steps should be taken to reduce the cost of living of the people. In 1933, as we have often reminded the House, the British Medical Association came to the conclusion that a family of five, consisting of the parents and three children aged, say, from 6 to 14, would cost to maintain on the British Medical Association minimum diet 22s. 6d. a week. A publication issued by the British Medical Association only last week showed that there has been an actual rise, according to the Association, in the cost of that diet of 4s. in the £ since that original statement was made. Therefore, the actual cost to-day of that minimum diet—which all of us on this side agreed at the time was inadequate really as a proper standard—has gone up to 27s. 4d. This rise has been due to the heavy import duties on foodstuffs. It was emphasised at the time that the British Medical Association diet provided the bare minimum necessary to maintain life.
A recent investigation which I am going to recommend to the Chancellor for his personal study is described in a document called "A Report on Socialism and the Standard of Living," prepared and published by the Labour party and submitted to the recent National Conference of Labour Women at Leamington. According to that very excellent document, the cost of the British Medical Association diet last November—during the winter months—varied from 28s. to 32s. They collected that information by making studies in different districts. Many of the women engaged in that particular inquiry commented freely on the very


poor qualities sometimes obtainable at the prices quoted. In the light of that situation, we consider it iniquitous that the total yield to the Chancellor of the Exchequer of these taxes on the stomach and health should have amounted to no less than £40,750,000 last year; and, with the addition of the increased Tea Duty, and probably a rather larger import of one or two commodities, you can reckon that the receipts the Chancellor will get from food taxes alone in the current year will be not less than £44,000,000. A very great part of that money going into the Chancellor's purse is at the expense of the stomachs and the health of the poorest people of this country. If you take the comparison between the financial year 1930–31 and the current financial year, our Customs impositions altogether, including the taxes on food, have risen by something like £106,000,000.
I believe the Chancellor has had the matter put to him before, and I daresay some of my hon. Friends may refer to it, so I will not take time to refer in detail again to the very careful, considerate statements which Sir John Orr has made in the past as to what is really necessary if we are to have a fit nation. I do not think anybody is more insistent than he is that, however much you may promote national standards of physical training to secure national fitness, if you cannot have a dietary within the reach of the common people, you will not have an A. 'I nation to face whatever crises the nation comes up against. In the last depression it may be said that while wages fell, they did not fall at the same rate as retail prices fell, that unemployment rose steadily, short-time employment increased, and the standard of life of many sections of the workers was lowered. Since that time it has been a constant struggle for the organised worker, through his trade union, to try and recover the position which he had before the depression, and it is very difficult for the worker to recover that position if every time that he has to purchase his weekly necessities over the counter he has to face this very high and, under this Government, increasing burden of taxation. We are, therefore, only pleading in this respect for justice to the organised worker of the country.
I am afraid also that unless we can get the second part of our Clause adopted,

there is no guarantee that these very heavy food duties will not continuously increase. We have had experience of that already. We have had the constant descent upon the Import Duties Advisory Committee each year, as, for example, at Christmas time, with the demand for a special tax to be put on to keep out the cheap turkey required for the working-class household, which is able perhaps to have a little Christmas festivity; and you will find from time to time that without any prior discussion in this House, as the principal taxing authority, food taxes may be imposed and increased by the outside pressure of vested interests upon the Import Duties Advisory Committee. We hope, therefore, that the Chancellor of the Exchequer, in those circumstances and in the light of the fact that we want to see the country on a real and sound basis of prosperity, will give us the right to take out of the hands of the Import Duties Advisory Committee the power to initiate taxation, before this House has considered it, in relation to foodstuffs.
There is one last point that I want to make. Some months ago now—I think it was last February—the Prime Minister said that the time was not yet ripe to discuss the proposals of M. van Zeeland in the direction of freer trade. Nearly five months have elapsed since that suggestion was made by the Prime Minister, and I think it is time that we should ask the Chancellor, having regard to the general trade outlook, whether this country is or is not going to give some lead in the direction of this move towards freer trade. We think that if the Government would accept this Clause, it might be some guarantee that on the general question of a move to freer trade between the nations of the world we were to have sympathetic consideration. I understand that at the present time the discussions with the United States for a trade agreement appear to be hanging fire, because of action taken, I am told—I make this statement on information given and not from my own knowledge—partly by the National Farmers Union and partly by the Federation of British Industries. Why do not the Government, in response to our request to-day, help the negotiations by reducing the Ottawa duties upon American products such as wheat, fruit, etc., in return for substantial reductions, which I believe they would be able to negotiate with the United States, upon our indus-


trial manufactures from this country entering the United States? This principle of freer trade with other friendly, democratic countries might be extended to the Scandinavian countries.
Speaking in the Debate on a similar question in 1936, I think on the Committee stage of the Finance Bill, the present Minister of Agriculture, who was then Financial Secretary, said, in regard to my reference to a revolution in fiscal policy:
There has been a change, but it was not a change that happened accidentally. It was a deliberate change inspired by policy and a change which, without transgressing the Rules of Order, I may claim has abundantly proved its wisdom and success."—[OFFICIAL REPORT, 17th June, 1936; col. 1037, Vol. 313.]
The Government to-day do not adopt the position of the Chancellor of the Exchequer and Lord Runciman, as he now is, in 1931, when they first entered the National Government, that they would not stand for the taxation of food. They take credit to themselves that this taxation of food is a deliberate result of their policy, and they claim that it has been a success. We submit, on the other hand, that in the long run it is an injury to trade, trade taken in the bulk, that it is a wicked encroachment upon the standard of life of the masses of the workers of the country, and that, in the interests both of those workers and of the development of world trade, and therefore of employment and of an increased standard of life, this Clause ought to be accepted.

4.38 p.m.

Mr. Sexton: It gives me very great pleasure to support this Clause. The Finance Bill has the effect of evening out the income among the various sections of the community. One of the fundamentals of taxation ought to be that it should be placed on those who are able to bear it, and the criterion of the ability to bear ought to be the residue left for the purposes of life. Therefore, direct taxation seems to me to be the most desirable, because it can be ascertained how much is left. In my opinion, Income Tax is the most equitable form of taxation. Incomes are easily ascertainable, the burden to be borne is ascertainable, and the residue can easily be calculated. To me, indirect taxation is the most undesirable, for it is virtually a hidden tax, and it violates the fundamental of equality of,sacrifice by mulcting the poor on the

same basis as the rich; instead of spreading out more evenly the national income, it causes unevenness. Taxation of food means that, by and large, each individual pays an equal sum in taxes, and surely such seeming equity is the very negation of equality of sacrifice, for the poorer classes have infinitely less substance left.
These impositions of food taxes on people with small, fixed incomes, like widows, old-age pensioners and ex-service men, must lower the standard of life. They have two choices. First, they can buy less of the food which is taxed—and they already get far too little of the food that is necessary for them, as has been pointed out by my right hon. Friend the Member for Hillsborough (Mr. Alexander), when he referred to the reports of Sir John Orr and the British Medical Association—and secondly they can buy the same quantity of food, and then they will have less left with which to buy clothes and other necessities, to say nothing of comforts. It is possible for a family of four people in this country to have an income of £8 a week which is not assessable to Income Tax. The food taxes on those people would amount to about 15s. per head, on the figures quoted by the right hon. Member for Hillsborough, or £3 per year, or a weekly total per family of M. 2d., which works out at 0.375 per cent. of their income. At the same time in this country we could have at other family of four with an income of 21s. a week, whose food taxes would be at least the same, namely is. 2d. per week, more than 6 per cent. of their income, or 16 times as high a percentage as in the case of the higher paid family. What is left? In the first case you have £7 18s. ro10d. per week, and in the second case 19s. ro10d., or eight times less per week for those people to live on.
Those figures are based on the total of food taxation for the past three or four years. The receipts from Import Duties for 1933–34 on food and drink were £5,988,000, for 1934–35 £5,604,000, and for 1935–36, £6,321,000; receipts from the Ottawa Duties in the same three years were 1933–34 £7,704,000, 1934–35 £7,526,000, and 1935–36 £8,117,000; and the total revenue from food taxes during the past three years, including taxes on feeding stuffs for animals and tea, sugar, and cocoa, were, in 1934–35, £31,265,000, in 1935-–36 £36,259,000, and in the last available year, 1936-–37, no less than


£38,381,000. The "Ministry of Labour Gazette" figures of the cost of living show that with the increased and increasing food taxation, the prices of our most common articles of diet are rising. During the last four years we have had increases in prices as follows: Streaky bacon 3¼ d. per lb., flour 9½d. per stone, bread 2½d. per 4-lb. loaf, tea 4¾d. per lb., milk i1d. per quart, butter 1½d. per lb. fresh and 2½d. per lb. salt, cheese 1d. per lb., potatoes 62½d. per stone, and so I could go on. As these food taxes go up—and they have gone up—so fixed incomes like old age pensions, widows' pensions, and ex-service men's pensions, decrease in purchasing power, and in 1937, for the same money as was spent in 1933, only four-fifths of the quantity of food can now be purchased. Because these people with fixed incomes cannot afford a lower standard of life, as they are already below the poverty line, and because a great country like this cannot afford to plunge its deserving people farther down into the depths of poverty, I have great pleasure in supporting the proposed new Clause.

4.44 P.m.

Mr. Holdsworth: I think anybody taking his mind back and reading over the history of this House would never believe that we could have had such a small gathering when we were discussing such a vital thing as the taxation of the food of the people. It shows a really remarkable change in the attitude of this House when we can treat almost with indifference what, to my mind, is one of the most vital changes in the whole of our fiscal system. I want to make an appeal to the Chancellor of the Exchequer. During the whole of his political life he has called himself a Liberal, and, as far as I know, he has always been opposed to the taxation of food. I cannot help but think of the phrase "the free breakfast table," and it almost seems ironical that a Chancellor of the Exchequer of the Liberal persuasion should find it possible to get up and oppose a Clause of this nature. At a certain conference during last week it was shown how essential it was to keep in being the Liberal principles throughout the world. One of the first good principle is the freedom to purchase food at its cheapest cost in order to enable the people to enjoy the fullest and most

healthy life possible without having to bear the terrible burden of food taxes. Taking my mind back to the great protagonist in this country of the change in our fiscal system, Joseph Chamberlain, almost the arch-Protectionist over the past 500 years, I cannot remember that he ever suggested that there should be taxation of the food of the people. It was always the maxim of those who believed in tariff reform that we should not tax raw material industrially, but, surely, the last thing that we ought to tax is the raw material of life itself. I suggest that the Chancellor of the Exchequer should listen with some sympathy to the case for this new Clause.
I cannot help being struck by the effect of these taxes on the unemployed, particularly those who are relying upon the Unemployment Assistance Board for their very existence. I remember that during the Debates on the Unemployment Insurance Act in 1934, when we were discussing the basis of payment to people after they had got through what they were entitled to draw under ordinary unemployment insurance, the idea was to give these people just sufficient to enable them to live. It is doubtful whether it even does that, when one considers their position after a period of unemployment and they have drawn their insurance benefit for six months. There is a rising tide of people who have been unemployed for 12 months and longer, and to those very people to whom we give what we 'consider to be the lowest sum in order to enable them to live, we go and say, "Not content with seeing you in a position of mere existence, we are going to take a little from your small and inadequate sum in order that you can fulfil the patriotic duty of helping to keep the State going." I sometimes think that they must nearly scream when they hear that sort of nonsense.
I have read with a good deal of interest many books during the past year or two as to whether the people of this country are getting sufficient nourishment or not. Some of the figures, I believe, are exaggerated, but it is undoubtedly true that there are large numbers of people who are really not able, because of the smallness of their incomes, to purchase the food they require. I believe that it is stated that there are 18,000,000 or 19,000,000 people who are not getting


adequate nourishment. I listen with a good deal of interest to a lot of this talk about keeping fit. I listen sometimes almost with amazement to the hon. Lady the Member for Sutton (Viscountess Astor), who is always telling me that it is not because people cannot buy the proper things, but because the working folks of this country do not know what to buy and how to cook it. I would say to the Noble Lady and to the Committee in general that the working people of this country would know what to buy if they had the money with which to buy it. To take, as the hon. Gentleman who preceded me said, a sum of almost £40,000,000 out of the pockets of the wage-earners and deprive them in many cases of the real source of nourishment, and then in the next breath to appeal to them to link themselves with some keep-fit campaign is the height of political absurdity. If we enabled the people really to get the food at the cheapest possible price which would give to the producer adequate recompense for his labour, we should be doing far more to produce a really fit nation than anything that we can do by setting up a large number of classes and that sort of thing.
It is usual in these Debates for the Minister to get up at that Box and say, "There is something to be said for all this, but in the year 1931 the price of hay was so-and-so, and now it is a bit less." That sort of argument cuts very little ice with me. My contention against food taxation is not merely based upon a comparison as between one year and another, but upon the fact that you are with deliberate intent making the food of the people dear. That I believe to be a wrong principle. I suggest to the Chancellor of the Exchequer that the best way of getting a healthy nation is to allow the ordinary folk who make up the greater part of the nation to obtain real and adequate nourishment at the cheapest possible price. It is a mistake to tax the vital things which we need. I know that milk is not taxed, but it is in effect, with all these wonderful schemes that you have in regard to meat and butter. My wife told me the other day that even the prices of vegetables almost made them prohibitive to the working classes. I suggest that one of the greatest signs that the Chancellor of the Exchequer can give to the Committee of his belief in Liberalism is to help to carry out the old principle

of the free breakfast table. I support the new Clause.

4.53 P.m.

Mr. David Adams: One would have imagined, in listening generally to the discussions which have taken place in the country on the question of national fitness, that the entire.Committee would have been with the proposers of this new Clause. It is certain that if the Clause were submitted to the workers of the country it would be universally accepted. It is an extraordinary commentary upon a Government who persist in describing themselves as a National Government that they should continue to tax the food of the people. There is no direction in which one can turn without attention being drawn to the condition of the people. While the housing problem is being dealt with on national lines, the problem of the condition of the people, as far as their nutritional and health standards are concerned, is still left in abeyance, and, in fact, it is not only neglected but the problem is deliberately accentuated by the National Government. It was interesting to notice that at the last meeting of the British Association some of the leading scientists dealt with the question of the nutrition of the British people and demanded redress. The leading members of the Church of England, Nonconformists, economists, nutritional experts and the National Fitness Campaign are all directing attention to the conditions of the people.
Last Friday's Debate upon the Report of the Unemployment Assistance Board forced public attention very specifically to the problem and no doubt the Government are paying some attention to the matter, seeing that it was to a large extent the voice of hon. Members on the Government side of the House more particularly. The right hon. Gentleman the Member for Sparkbrook (Mr. Amery), who has been a Cabinet Minister, and was First Lord of the Admiralty in a previous Government, directed the attention of the Government to the necessity of family allowances. He did so on the ground that that is an urgent protective measure against outside pressure and influences, such as food taxation, if you are to preserve the population of the future and the health of the nation at large. It was shown that no less than 23 per cent. of the workers are in receipt of 45s. or


less; that 47 per cent. receive 55s. or less; and that no less than one-third of the working population are without the necessary resources to maintain themselves and their families in a state of nutrition and health. The report of the Unemployment Assistance Board indicated that in parts of County Durham there was a substantial number of the population whose weekly earnings were 4os. or less.
What possible justification can the Government have in maintaining this intolerable burden upon the masses of the people? Mr. Seebohm Rowntree has shown us that not less than 55s. per week for a family of five is required to maintain a proper state of physical efficiency, and for rural workers 43s., assuming that a modest amount is expended upon rent and kindred outgoings. As I have pointed out, one-third of our population are in so depressed a condition that they are quite unable in a normal way to purchase the requisite foodstuffs for themselves and their families. I suppose that it is not disputed by the Chancellor of the Exchequer that £38,000,000 or £40,000,000 is in this way taken from the pockets of the industrial workers of the country. It is true that, while the cost of living can be overtaken by certain trades by wage agreements, the great mass of the people are excluded from the beneficent operation of such arrangements and their wages are not raised in harmony with the increased cost of living.
It is futile for the Government to anticipate that their fitness campaign can be successful unless they direct their attention to the question of the food of the people. One might say further that, in addition to the taxation of food, the quota system and the exclusion of a considerable proportion of our foreign trade has meant a lessening demand for our coal and other products. Our mining population has particularly suffered, in the first place because the price of their foodstuffs are affected, and further because the production of coal is restricted. It is imperatively necessary, if we are to fulfil our obligations to the day in which we live, for the Government to take steps to deal with this situation. It cannot be said that there are not abundant directions in which they could raise the taxes they require. The National Defence Contribution has not brought in

the amount of money that was contemplated, but one does not hear any suggestion from the Government of an increase of tax in that direction. One could point out different directions in which revenue could be raised—the Super-tax, Death Duties and a diversity of ways.
The taxation of food should be the last extremity. It was hit upon by a reactionary Government, which was returned under conditions unprecedented in the history of the country. In 1931 the country was given to understand that taxation of this character would not be introduced before the most careful examination had been made, but no such examination has been made. It is, therefore, the duty of the Chancellor of the Exchequer to retrace the wrongful step taken by the Government and, in the general interest, to support the new Clause.

5.3 P.m.

Mr. Ridley: The right hon. Member for Hillsborough (Mr. Alexander) has delivered such an excellent speech that all that remains for other hon. Members to do is to attempt to underline one or two of the points that he raised. There are three points that I should like to underline. The first point is the effect of these duties on the existing stagnation of world trade. There must have been on the part of the Government some faint recognition of that fact, when they joined with the French Government in inviting M. van Zeeland to undertake an examination of the position. In the report of M. van Zeeland it is clear that everywhere there was a similar recognition of the evil that exists, but everywhere there was a similar reluctance to do anything courageous. In the matter of trade stagnation and in other correlated matters the world is waiting for a lead. One of the most important results of the adoption of this new Clause by the Government would be to give to the world a new hope of some economic recovery, because we should have begun to break down those tariff barriers which year by year have grown higher and higher and have made it more and more impossible for world trade to climb over them and for the ordinary channels of exchange to flow as freely as before.
The second point is the contribution which these duties make to what we regard as the iniquitous balance of taxation.


The hon. Member for Oxford University (Sir Arthur Salter) congratulated the Government, the other night, on the fact that the proportion of indirect taxation to direct taxation was steadily falling. That note of congratulation ought to have been conditioned a little by a further explanation of the facts of the case. It must not be assumed that indirect taxation is falling in quantum as it is falling in ratio. It is falling in ratio because of the increase of the ratio of direct taxation, but the quantum of indirect taxation has grown year by year under conditions for which this Government have been responsible, and it will need to fall a great deal further than it has fallen in ratio before it reaches the ratio which existed during the time of the Labour Government in 1930–31.
The third point is the effect of this form of taxation on the lives of the low wage earners and the unemployed. I wish we could make the comfortable living people realise what sort of lives we are condemning millions of our people to experience and endure. It is no exaggeration to say that on the inadequate allowances provided by the Unemployment Assistance Board we are compelling between 2,000,000 and 3,000,000 of people to live a sub-standard life; a life which is steadily lowering their physical capacity and steadily lowering their capacity for disease resistance. We are extracting from their meagre incomes by import duties not less than £20,000,000 to £25,000,000 a year, taking it from their incomes not in mathematical proportions, but we are taking out of their daily diet, a pint of milk, a loaf of bread and an orange for their children. The removal of these import duties would in some families do something considerable to lift this sub-standard life that we are compelling them to endure, and would give them a chance to buy necessities a little less inadequately than is now the case under the allowances granted by the Unemployment Assistance Board.

5.8 p.m.

Mr. W. Joseph Stewart: The reason I intervene is to ally myself with my colleagues against this indirect taxation, which is interfering to an appreciable extent with the standard of living of our people. I was interested in reading a few weeks ago the report of a meeting, held in London, of physical instructors in

our elementary schools. The great concern of the instructors was the fact that the physique of the children attending our elementary schools does not reach the standard that it ought to reach. In many instances it had been found necessary to set aside boys and girls so that they should not take part in physical exercise because they had not reached the required standard and, obviously, were suffering from malnutrition.
At the close of the War I remember going through a summary of the findings of the various medical boards who, in summing up their examinations, stated that there was only one man in every nine presenting himself for medical inspection who was perfectly fit. The result was that at that time we concentrated on the physique of our people with a view to raising our manhood from a C3 to an Ar1 category. In the process we were willing to spend millions of pounds. Although we were prepared to do that in those days, by imposing duties on foodstuffs the Government have interfered with the standard of living of our people and prevented them in many instances from having sufficient quantities of food in tens of thousands of homes. The housewife, it will be readily admitted, is more acutely affected than anyone else by a rise in prices. Every rise in the price of necessaries adds to the housewife's work and to the degree of worry, which she cannot pass on to anyone else.
In working-class homes a rise in food prices without a corresponding rise in wages means that something must be done without. If the same amount of food is to be bought, nothing can be spared for household replacements. When the income is already so low that expenditure on food and other things is limited and cut down to the lowest minimum, a rise in price generally means that the only thing to do is to buy less food, and that adversely affects the household. The effect of high prices on the unemployed and the old age pensioners has been referred to. Those with fixed incomes, those who are recipients of unemployment benefit, and those who come under the Unemployment Assistance Board, together with those who receive Poor Law relief, are the people who are the greatest sufferers.
In Durham County, owing to insufficient income going into homes which are


further penalised through the rise in prices, we have to pay in Poor Law relief to 52,000 persons no less than £1,690,000 this year. To old age pensioners, upon whose necessaries of life import duties are having a serious effect, we have to pay, in the case of 10,000 people, approximately £4,000 a week to help them to live. Apart from this expenditure, for the provision of dried milk to nursing and expectant mothers and liquid milk to children in our elementary schools, we have to spend another £50,000 or £60,000. We are seeking to do that in Durham in order to help our people to maintain a decent standard of living, so that they will not deteriorate physically, but at the same time the Government, by indirect taxation, are deliberately working in the opposite direction. By these Import Duties they are seriously affecting the health of our people and undoing the work that we are seeking to do.
There is very great concern and alarm at the substantial rise in the indirect taxation levied on things which people need. Indirect taxation has been increased much more than direct taxation on income. In 1931–32 it represented 34.12 per cent. of the revenue, and in 1936–37 it represented 40.29 per cent. of the revenue. It means a shifting of the burden of taxation from the well-to-do to the working classes, who have to pay this taxation in higher prices in the shops. It has been said that since 1932 no less than £109,000,000 has been raised by new food taxes imposed by the Government under the Import Duties Act of 1932, by the Ottawa Agreements and by the Irish Free State Special Duties Act. From 1932 to 1937 under the Import Duties Act, which covers meat, dairy produce, fresh fruit and vegetables, fish, dried fruit and other things, no less a sum than £32,374,000 has been raised in taxation. The Irish Free State Special Duties on live cattle, meat, butter, eggs and cream realised during the same five years £43,000,000, and the Ottawa duties upon wheat, butter, cheese, eggs, condensed milk and fruit realised L£32,000,000. The beef duties imposed in 1936 realised for the first three months £541,000. That is a total of £109,697,000. In addition there is a revenue tax on tea, imposed in 1932.

The Deputy-Chairman: I think we had better keep to the articles of taxation which are directly covered by the new Clause.

Mr. Stewart: Housewives, therefore, since the beginning of 1932 have paid more than £132,000,000 across the shop counter in additional food taxes. The amount for the year 1936–37 was approximately £28,750,000, or nearly 12S. 6d. per head of the population. I submit that if import duties are imposed on poor households with a limited income, without any increase in wages, they are going to have a deterimental effect upon the physique of our people and will militate against the best interests of the nation.

5.20 p.m.

The Financial Secretary to the Treasury (Captain Euan Wallace): We have listened to six speeches on this new Clause, and it may be for the convenience of the Committee if I intervene now for a short period; it may perhaps enable the Committee to come to a decision on this matter and proceed to the great mass of business which is before us to-day. This Clause, or something analogous to it, has now been put on the Order Paper for five years running. In 1934 and 1935 it was discussed on Report stage, in 1936 on the Committee stage, last year the Chairman did not select it, and this year its scope has been widened to include the Ottawa Agreements Act of 1932, as explained by the right hon. Gentleman who moved it.
The first difficulty which stands in the way of accepting the new Clause is a very real and serious difficulty of interpretation. Many substances, for example various grains, oils and foodstuffs, which can quite well be used as, or made into, food are in fact used for industrial or other purposes. Glycerine, for instance, can be used for explosives or for making sweets, barley can be used for cattle food or for distilling a beverage which by some may be regarded as an important human food. Vegetable oils can be used for washing in the form of soap, or for eating in the form of margarine, and hon. Members will know that there are alternative uses in the case of potatoes and rice. Milk itself is the source of an important industrial material known as casein, which is used for plates, cups, combs and umbrella handles.
If the Clause were applied to all substances which can be used as foodstuffs, it would exclude from consideration under the Import Duties Act many substances which are in fact used for other purposes, like glycerine, potatoes, barley, rice and vegetable oils. If, on the other hand, it is in the minds of the Movers of this new Clause that it should be limited to products actually used for human consumption, I must explain that the Customs cannot at the time of importation make sure of the use to which any particular import is going to be put except by a burdensome and expensive form of control. Therefore the Committee is up against a formidable difficulty of interpretation. I quite admit that these practical difficulties, serious as they are, ought not to stand in the way of the removal of a genuine and widespread grievance, if in fact there is one. I want, therefore, to ask the Committee to consider two questions—first, whether the increase in the cost of food since the War is disproportionate to the general alteration in the value of commodities in terms of pounds, shillings and pence, and, secondly, whether the adoption of the proposed new Clause would in fact reduce materially the cost of living to the working people of the country.
As regards the first question, the cost of food is not in fact so high to-day compared with pre-war levels as other items in the working-class budget. The cost-of-living index for 1st June shows an increase of 55 per cent. over July, 1914, for all items, but the increase is only 38 per cent. for food. That, I think, disposes of the first question. The second point is whether the increase in prices which has taken place in the last 12 months can be attributed to the operation of the Import Duties Act or the Ottawa Agreements Act, both of which were passed in the year 1932. Although we have made one or two minor adjustments, for instance in the duty on peppercorns and in an extension for a fortnight in the duty on foreign tomatoes, it is substantially true to say that no new import duties have been imposed on food during the last 12 months.
I say with all respect to the right hon. Gentleman who moved the new Clause that in the view of my right hon. Friend and of hon. Members on this side of the Committee, comparisons in the cost of living in a working-class budget which

start from the bottom of the depression are of no practical value. We had a long Debate before Christmas on this matter and in another capacity I endeavoured to establish the contention, I am afraid not to the satisfaction of hon. Members opposite but I believe to the satisfaction of people in general, that the fairer point of comparison with the conditions obtaining to-day is the year 1929, and if that datum line is taken it is true to say that the cost of living has not risen.
There is another important point. The right hon. Gentleman opposite and most hon. Members who have followed him have advocated the acceptance of this new Clause as something more than a matter of expediency, something more than relieving, as they put it, some sections of the community from certain taxes on food. I understood that they advocated it as a matter of principle. The hon. Member for South Bradford (Mr. Holds-worth) at any rate spoke strongly in favour of a free breakfast table. I must therefore make it clear that this new Clause, if it is passed, is not going to provide a free breakfast table or anything like it. It deals with two specific forms of taxation on food, but there are many articles of general consumption which would not be affected if we accepted the new Clause. It does not touch the revenue duties on tea, cocoa, coffee, sugar and dried fruit, which are responsible between them for about £20,000,000. It does not touch the duties on foreign beef and veal under the Act of 1937 which come to about £3,500,000. In addition it does not, of course, touch the considerable range of foodstuffs already free of duty, which include meat (except foreign beef and veal and canned meat), bacon and all food products from the Dominions, except those which are subject to revenue duty. Hon. Members should realise that to-day over half of our butter, three-quarters of our meat, go per cent. of our cheese, two-thirds of our eggs in shell, the bulk of our vegetables as well as much of our fruit, pay no duty at all.
Therefore, if we accepted this new Clause we should really produce an extremely anomalous position. The beef and veal duties and the revenue duties would remain, and of the £39,000,000 odd which should be collected from food taxes this year—the right hon. Gentleman said £44,000,000 but he did not allow for the disappearance of the Irish Free State


duties 'which have now gone—only about £14,000,000 would be affected; and I would remind the Committee that, as the Ottawa duties cannot be reduced without the consent of the Dominions, we should, in order to achieve even that limited result, have to denounce both the Ottawa Agreements of 1932, and the Agreement which was made with Canada as recently as 23rd February, 1937.

Mr. Holdsworth: Are we to understand from the right hon. and gallant Gentleman's speech that if the right hon. Gentleman the Member for Hillsborough (Mr. Alexander) will withdraw the Amendment, the right hon. and gallant Gentleman will bring in a more comprehensive Clause taking off all the duties:

Captain Wallace: I can only say with all respect that if the hon. Gentleman or anybody else has got that impression, he must have got into a profound fog. The denunciation of those agreements would lose us, of course, all the advantages which our trade in the Empire derives from them—that is a subject which I cannot discuss fully now. It would, moreover, deny to our home producers of food any chance of protection either now or in the future against foreign competition; it must be remembered that that is an advantage which is gained already from the Ottawa duties, and can also be achieved by means of the valuable weapon which is available to us through the Import Duties Act.
The loss of revenue that would be involved by this proposal would be L£14,376,000. I think the Committee will appreciate that, whatever arguments may be adduced in favour of this Clause in theory, my right hon. Friend is not, in present circumstances, in a position to give up that amount. When there is added to that the fact that the acceptance of this Clause would mean serious anomalies in food taxation, and the denunciation of our agreements with the Dominions, with consequent damage to our export trade and to home producers of food, and when on the other side there is no evidence whatever of a compensatory advantage, since no one has succeeded in proving that the existence of these duties has had a material effect on the cost of living, I think the Committee will realise that this Clause is one which we shall have to ask them to reject.

5.33 P.m.

Mr. T. Williams: I think the right hon. and gallant Gentleman the Financial Secretary found himself in a profound fog. He said that he could not accept the proposed Clause for one or two reasons, which he explained very clearly. He emphasised the anomaly that would be created if we abolished duties on food amounting to approximately £14,500,000, but left taxation of £26,000,000 upon tea, coffee, cocoa, sugar, beef and so on. He said that the new Clause would have disastrous effects upon home agriculture, since the advantages of protection to it would be entirely gone. What apparently the right hon. and gallant Gentleman did not notice was that neither the Ottawa Agreements nor the Import Duties Advisory Committee was responsible for the duty upon beef. The same Parliamentary machinery that was used in that case could be used if it was desired to provide further protection for any other section of the agricultural industry. Therefore, that argument, which may have appeared to be a fairly sound one to agriculturists, was really not as solid as the right hon. and gallant Gentleman made out.
Another argument which the Financial Secretary used was that if we could not dispose of all the duties on foodstuffs, why should we bother about disposing of some 35 per cent. of those duties, since that would create an anomalous position? But I feel that the items referred to in the Ottawa Agreements are so vital and fundamental from the point of view of nutrition that they cannot be ignored by the Financial Secretary and the Chancellor of the Exchequer. I appreciate the danger of denouncing the Ottawa Agreements, but the right hon. and gallant Gentleman and his right hon. Friend know that hon. Members on this side, from the time when the Ottawa Agreements were originally passed, have never hesitated to oppose the continuance of those agreements, which impose duties upon such foodstuffs as butter, cheese, tea, and one or two other items. I should like to ask the right hon. and gallant Gentleman, apart altogether from the question of the revenue derived from this source, what home agriculture obtains from a duty of 1½d. a pound on imported cheese. The right hon. and gallant Gentleman told us of the Empire butter that is imported duty free, but it is true to say that the duty paid on butter


that is imported from foreign countries has a direct effect upon the price of butter imported from various parts of the Dominions. It is fair to assume that if we import 50 per cent. of our butter from the Dominions and 5o per cent. from foreign countries, the imposition of a duty on imports from foreign countries has an effect on the price of every pound of butter which we buy either from the Dominions or from foreign countries. Therefore, that argument of the Financial Secretary does not seem to me to carry much weight.
It is true to say, as has been submitted in arguments from this side of the Committee, that there are millions of people in this country whose incomes are so small, through no fault of their own, that they cannot buy appropriate quantities of nutritious food, either because of one of two things or because of both—their small income, or the price of the article which they want to buy. I will not quote what has been said by the nutrition experts, but it is generally known that, although the average consumption of butter per person per week in this country is seven ounces, in the lower income categories the average consumption is only about three ounces. Clearly, the income of the home or the price of the commodity determines the quantity of butter which families are able to consume. If there is an absence of butter, which is one of the most nutritious of all foods, there is an absence of that physical fitness which all hon. Members are anxious to get in this country. The same thing applies to cheese. The right hon. and gallant Gentleman told us that 90 per cent. of all the cheese consumed in this country is free from duty. Is there any reason why we should impose a duty on the remaining 10 per cent., apart, of course, from the revenue which the Exchequer derives from these duties, which is perhaps a not inconsiderable item?
It seems to me that it is justifiable at all times for the Opposition to safeguard the prices of foodstuffs as long as those foodstuffs are so important in the diet of the common people. We have been told that there are 4,500,000 people in this country in whose cases the income is so small that less than 4s. is available for expenditure on food each week. I noticed that in the "Times" yesterday

there was a letter from the joint secretaries of the St. Pancras House Improvement Society, Limited, which is responsible for houses in which about boo families live. They stated that, despite the fact that the rents of those boo houses have been reduced materially, the income of a large number of those homes will not permit of the expenditure of 3s. per person per week on food—a figure far below the Rowntree estimate and the figure of the British Medical Association. Although coppers do not perhaps make much difference to people having an income of£10 or£15 a week, they make a vast difference to people in the lower wage categories.
The only other thing I wish to say with regard to this new Clause has reference to the Import Duties Advisory Committee having further power to recommend to the Government and the House certain forms of taxation on food. I repeat what I have said before, that I do not think the Import Duties Advisory Committee are the appropriate body to recommend taxation upon food. They have no costing system, they have no knowledge of the cost of production of the article on which they recommend that a duty shall be imposed, and they take the figures supplied by the farmers or by the person or persons interested in the production of that commodity. I do not think they are the appropriate body to recommend an increase in the duty on imported tomatoes, potatoes, or any other article. It may very well be that in the case of certain luxury vegetables at certain periods of the year there is ample justification for doing something similar to what was done in the early part of 1932, when the Agricultural and Horticultural Import Duties Act was passed; but broadly speaking, the Import Duties Advisory Committee are not the appropriate body to safeguard the interests of the consumers. I do not think that the interests of the home producer or the taxing machinery of the State would be materially affected if that Committee were deprived of further powers to recommend taxation on food. I consider that on general lines, despite the effect on the Treasury of losing £14,500,000, a not inconsiderable item to them, this new Clause can be justified on the basis of a physically fit nation, and for that reason, I shall support the new Clause.

Question put, "That the Clause be real a Second time."

The committee divised; Ayes, 133; Noes, 203.

Division No. 252.]
NOES
[5.43 p.m.


Aeland, R. T. D. (Barnstaple)
Harris, Sir P. A.
Poole, C. C.


Adams, D. (Consett)
Harvey, T. E. (Eng. Univ's.)
Ridley, G.


Adams, D. M. (Poplar, S.)
Heyday, A.
Riley, B.


Alexander, Rt. Hon. A. V. (H'Isbr.)
Henderson, A. (Kingswinford)
Ripon, J.


Anderson, F. (Whitehaven)
Henderson, J. (Ardwiek)
Roberts, Rt. Hon. F. O. (W. Brom.)


Attlee, Rt. Hon. C. R.
Henderson, T. (Tradeston)
Robinson, W. A. (St. Helens)


Banfield, J. W.
Hills, A. (Pontefract)
Salter, Dr. A. (Bermondsey)


Barnes, A. J.
Holdsworth, H.
Sanders, W. S.


Betsy, J.
Hopkin, D.
Sexton, T. M.


Ballenger F. J.
Jenkins, A. (Pontypool)
Short, A.


Bann, Rt. Hon. W. W.
Jenkins, Sir W. (Neath)
Silkin, L.


Benson, G.
John, W.
Silverman, S. S.


Bevan, A.
Johnston, Rt. Hon. T.
Simpson, F. B.


Broad, F. A.
Jones, A. C. (Shipley)
Sinclair, Rt. Hon. Sir A. (C'thn's)


Bromfield, W.
Jones, Sir H. Haydn (Merioneth)
Smith, Ben (Rotherhithe)


Burke, W. A.
Jones, Morgan (Caerphilly)
Smith, E. (Stoke)


Cassells, T.
Kelly, W. T.
Smith, Rt. Hon. H. B. Lees- (K'ly)


Chater, D.
Kennedy, Rt. Hon. T.
Smith, T. (Normanton)


Close, W. S.
Kirby, B. V.
Sorensen, R. W.


Clynes, Rt. Hon. J. R.
Kirkwood, D.
Stewart, W. J. (H'ght'n-le-Sp'ng)


Collindridge, F.
Lanshury, Rt. Hon. G.
Stokes, R. R.


Cove, W. G.
Lathan, G.
Strauss, G. R. (Lambeth, N.)


Daggar, G.
Lawson, J. J.
Taylor, R. J. (Morpeth)


Dalton, H.
Leach, W.
Thorne, W.


Davies, R. J. (Westhoughton)
Leonard, W.
Thurtle, E.


Day, H.
Leslie, J. R.
Tinker, J. J.


Debbie, W.
Logan, D. G.
Tomlinson, G.


Dunn, E. (Rother Valley)
Lunn, W.
Viant, S. P.


Ede, J. C.
McGhee, H. G.
Walkden, A. G.


Edwards, Sir C. (Bedwellty)
Maclean, N.
Walker, J.


Evans, D. O. (Cardigan)
MacNeill Weir, L.
Watson, W. McL.


Frankel, D.
Mender, G. le M.
Wedgwood, Rt. Hon. J. C.


Gardner, B. W.
Marklew, E.
Welsh, J. C.


Gibson, R. (Greenock)
Marshall, F.
Westwood, J.


Graham, D. M. (Hamilton)
Maxton, J.
White, H. Graham


Green, W. H. (Deptford)
Montague, F.
Whiteley, W. (Blaydon)


Greenwood, Rt. Hon. A.
Morrison, R. C. (Tottenham, N.)
Wilkinson, Ellen


Grenfell, D R.
Muff, G.
Williams, D. (Swansea, E.)


Griffith, F. Kingsley (M'ddl'abro, W.)
Naylor, T. E.
Williams, E. J. (Ogmore)


Griffiths, J. (Llanelly)
Owen, Major G.
Williams, T. (Don Valley)


Groves, T. E.
Palign, W.
Windsor, W. (Hull, C.)


Guest, Dr. L. H. (Islington, N.)
Parker, J.
Woods, G. S. (Finsbury)


Hall, G. H. (Aberdare)
Parkinson, J. A.
Young, Sir R. (Newton)


Hall, J. H. (Whiteehapel)
Pearson, A.



Hardie, Agnes
Pethiok-Lawrence, Rt. Hon. F. W.
TELLERS FOR THE AYES.—




Mr. Charleton and Mr. Mathers.




NOES


Acland-Troyte, Lt.-Col. G. J.
Cazalet, Thelma (Islington, E.)
Dorman-Smith, Major Sir R. H.


Agnew, Lieut.-Comdr. P. G.
Cazalet, Capt. V. A. (Chippenham)
Drewe, C.


Albery, Sir Irving
Chamberlain, Rt. Hn. N. (Edgb't'n)
Duckworth, Arthur (Shrewsbury)


Allen, Col. J. Sandeman (B'knhead)
Chapman, Sir S. (Edinburgh, S.)
Dugdale, Captain T. L.


Allen, Lt.-Col. Sir W. J. (Armagh)
Chorlton, A. E. L.
Duggan, H. J.


Anderson, Rt. Hn. Sir J. (Sc'h Univ's)
Christie, J. A.
Duncan, J. A. L.


Anstruther-Gray, W. J.
Clarke, Frank (Dartford)
Dunglass, Lord


Asshetan, R.
Clarke, Colonel R. S. (E. Grinstead)
Eckersley, P. T.


Astor, Viscountess (Plymouth, Sutton)
Clarry, Sir Reginald
Ellis, Sir G.


Astor, Hon. W. W. (Fulham, E.)
Cobb, Captain E. C. (Preston)
Emmott, C. E. G. C.


Baillie, Sir A. W. M.
Colfox, Major W. P.
Errington, E.


Balfour, Capt. H. H. (Isle of Thanet)
Colman, N. C. D.
Evans, Capt. A. (Cardiff, S.)


Baxter, A. Beverley
Colville, Rt. Hon. John
Fox, Sir G. W. G.


Beamish, Rear-Admiral T P. H.
Conant, Captain R. J. E.
Fremantle, Sir F. E.


Beaumont, Hon. R. E. B. (Portsm'h)
Cook, Sir T. F. A. M. (Norfolk, N.)
Furness, S. N.


Bennett, Sir E. N.
Cooke, J. D. (Hammersmith, S.)
Fyfe, D. P. M.


Bernays, R. H.
Cooper, Rt. Hn. T. M. (E'nburgh, W.)
Glyn, Major Sir R. G. C.


Birchall, Sir J. D.
Cranborne, Viscount
Gower, Sir R. V.


Blair, Sir R.
Crooke, Sir J. Smedley
Grant-Ferris, R.


Brass, Sir W.
Crookshank, Capt. H. F. C.
Gretton, Col. Rt. Hon. J.


Briscoe, Capt. R. G.
Cross, R. H.
Gridley, Sir A. B.


Brown, Col. D. C. (Hexhem)
Crossley, A. C.
Grimston, R. V.


Brown, Rt. Hon. E. (Leith)
Davidson, Viscountess
Hambro, A. V.


Brown, Brig.-Gen. H. C. (Newbury)
Davies, C. (Montgomery)
Hannah, I. C.


Browne, A. C. (Belfast, W.)
Davison, Sir W. H.
Hannon, Sir P. J. H.


Bull, B. B.
Dawson, Sir P.
Harbord, A.


Bullock, Capt. M.
De Chair, S. S.
Haslam, Henry (Horncastle)


Burton, Col. H. W.
De la Bern, R.
Hely-Hutehinson, M. R.


Gartland, J. R. H.
Denville, Alfred
Hepworth, J.


Cayzer, Sir H. R. (Portsmouth, S.)
Donner, P. W.
Herbert, A. P. (Oxford U.)




Herbert, Major J. A. (Monmouth)
Mills, Major J. D. (New Forest)
Simon, Rt. Hon. Sir J. A.


Higgs, W. F.
Moreing, A. C.
Sinclair, Col. T. (Queen's U. B'Irst)


Hoare, Rt. Hon. Sir S.
Morris-Jones, Sir Henry
Smiles, Lieut.-Colonel Sir W. D.


Holmes, J. S.
Munro, P.
Smith, Sir Louis (Hallam)


Hope, Captain Hon. A. O. J.
Pleven-Spence, Major B. H. H.
Smith, Sir F. W. (Aberdeen)


Hopkinson, A.
O'Connor, Sir Terence J.
Smithers, Sir W.


Howitt, Dr. A. B.
Palmer, G. E. H.
Somervell, Rt. Hon. Sir Donald


Hudson, Capt. A. U. M. (Hack., N.)
Peaks, O.
Somerville, A. A. (Windsor)


Hume, Sir G. H.
Peat, C. U.
Southby, Commander Sir A. R. J.


Hunloke, H. P.
Perkins, W. R. D.
Stanley, Rt. Hon. Oliver (W'm'I'd)


Hunter, T.
Peters, Dr. S. J.
Stourton, Major Hon. J. J.


Hurd, Sir P. A.
Petheriok, M.
Strauss, E. A. (Southwark, N.)


Inskip, Rt. Hon. Sir T. W. H.
Pickthorn, K. W. M.
Strauss, H. G. (Norwich)


James, Wing-Commander A. W. H.
Pilkington, R.
Stuart, Lord C. Criohton- (N'thw'h)


Jones, L. (Swansea W.)
Ponsonby, Col. C. E.
Stuart, Hon. J. (Moray and Nairn)


Kerr, Colonel C. I. (Montrose)
Radford. E. A.
Tasker, Sir F. I.


Keyes, Admiral of the Fleet Sir R.
Rathbone, J. R. (Bodmin)
Taylor, Vice-Adm. E. A. (Padd., S.)


Lamb, Sir J. Q.
Rayner, Major R. H.
Thomson, Sir J. D. W.


Lambert, Rt. Hon. G.
Reed, A. C. (Exeter)
Thorneycroft, G. E. P.


Latham, Sir P.
Reid, Sir D. D. (Down)
Titchfield, Marquess of


Law, Sir A. J. (High Peak)
Reid, W. Allan (Derby)
Touche, G. C.


Leech, Sir J. W.
Remer, J. R.
Tree, A. R. L. F.


Leighton, Major B. E. P.
Riekards, G. W. (Skipton)
Turton, R. H.


Levy, T.
Ropner, Colonel L.
Wallace, Capt. Rt. Hon. Euan


Liddall, W. S.
Ross Taylor, W. (Woodbridge)
Ward, Lieut.-Col. Sir A. L. (Hull)


Lipson, D. L.
Rowlands, G.
Ward, Irene M. B. (Wallsend)


Mabane, W. (Huddersfield)
Royds, Admiral Sir P. M. R.
Wardlaw-Milne, Sir J. S.


MacAndrew, Colonel Sir C. G.
Ruggles-Brise, Colonel Sir E. A.
Warrender, Sir V.


Macdonald, Capt. P. (Isle of Wight)
Russell, Sir Alexander
Waterhouse, Captain C.


McEwen, Capt. J. H. F.
Russell, R. J. (Eddisbury)
Whiteley, Major J. P. (suckingham)


McKie, J. H.
Russell, S. H. M. (Darwen)
Wilson, Lt.-Col. Sir A. T. (Hitehin)


Maclay, Hon. J. P.
Salt, E. W.
Windsor-Clive, Lieut.-Colonel G.


Maitland, A.
Sandeman, Sir N. S.
Winterton, Rt. Hon. Earl


Margesson, Capt. Rt. Hon. H. D. R.
Samoan, Rt. Hon. Sir P.
Withers, Sir J. J.


Markham, S. F.
Scott, Lord William
Womersley, Sir W. J.


Marsden, Commander A.
Seely, Sir H. M.
Wright, Wing-Commander J. A. C.


Mason, Lt.-Col. Hon. G. K. M.
Salley, H. R.



Mayhew Lt.-Col. J.
Shaw, Captain W. T. (Forfar)
TELLERS FOR THE NOES.—


Mills, Sir F. (Leyton, E.)
Shepperson, Sir E. W.
Major Sir James Edmondson




and Major Harvie Watt.

NEW CLAUSE.—(Deduction in respect of children undergoing training.)

(1) Section twenty-one of the Finance Act, 1920, which provides for deduction in respect of children, shall have effect as if the references in Sub-sections (i) and (2) thereof to a child receiving full-time instruction at an educational establishment included references to a child undergoing training by any person (hereafter referred to as "the employer ") for any trade, profession, or vocation in such circumstances that—

(a) a child is required to devote the whole of his time to the training for a period of not less than two years; and
(b) the emoluments, if any, receivable by, or payable by the employer in respect of the child while undergoing the training, do not exceed thirteen pounds a year, exclusive of any emoluments receivable or payable by way of return of any premium paid in respect of the training;

For the purpose of paragraph (b) of this Sub-section all emoluments at any time receivable by, or payable by, the employer in respect of a child in respect of whose training a premium has been paid shall be deemed to be receivable or payable by way of return of the premium, unless and except to the extent that the amount thereof exceeds in the aggregate the amount of the premium.

(2) In this Section the expression "emoluments" means any salary, fees, wages, perquisites, or profits or gains whatsoever, and includes the value of free board, lodging, or clothing.

(3) For the purpose of a claim in respect of a child undergoing training the surveyor may require the employer to furnish particulars with respect to the training and the emoluments of the child in such form as may be prescribed by the Commissioners of Inland Revenue.—[Mr. Tinker.]

Brought up, and read the First time.

5.50 p.m.

Mr. Tinker: I beg to move, "That the Clause be read a Second time."
The object of this Clause is that the rebate which is given in respect of children receiving instruction at educational establishments should apply also to young people who are undergoing courses of training in workshops and other forms of vocational training. Our idea is that the term "education" should not be taken as applying only to university education. I give one illustration which was referred to in a previous Debate on this subject. My hon. Friend the Member for Ince (Mr. G. Macdonald) mentioned then that in his own family there were two boys, one of whom was attending Manchester University while the other was being trained for a trade or occupation of a different kind. A rebate was granted in respect of the boy at the university but not in respect of the other boy because he was not in attendance at what is called


an educational establishment. There we have a typical instance of how the present arrangement works. It may be said that in that case the parent is receiving the benefit in respect of the one child, but what about the case in which there is only one child who is receiving training of the sort which I now wish to have included? If education means anything at all, it means training in the broad sense and not in the narrow sense of university training.
We hope that this proposal will receive more recognition to-day than it has met with on previous occasions. The Clause tries to make it clear that proof has to be given in respect of earning capacity. Previously it was argued that young people who were receiving training of this kind might be earning money. We have put into the Clause a provision that the child shall be articled for at least two years and that the emoluments shall not be more than £13 a year. If the child receives more than £13 a year the parent will be excluded from the benefit of the Clause. Last year the Attorney-General and the Chancellor of the Exchequer were both in sympathy with the principle of the Clause but explained that it was a question of cost. Previously the Chancellor had said—I think he made a mistake which he admitted later—that it might cost from £1,000,000 to 12,000,000 per year.

The Chancellor of the Exchequer (Sir John Simon): Not this proposal standing by itself.

Mr. Tinker: Afterwards the right hon. Gentleman made it clear that he was referring to the possibility that such a concession might lead to further claims which would bring the figure up to that total. Previous Chancellors have mentioned a figure of about £100,000 a year as the possible cost, but, whatever the figure may be, it appears to me that if we recognise one form of education in this way we ought to recognise other forms as well. I think we have moved on a little since the Act of 1920 was passed and that we are now adopting the broader view that education really means training in almost anything which is for the future benefit of the race. Training on the mechanical side is now recognised as a form of education. It is on those lines that we appeal to the Committee. We have made a

similar appeal on previous occasions. When a previous Clause of this kind was discussed, the then Financial Secretary to the Treasury said that such a Clause had appeared on the Order Paper for five years in succession. The proposal which I am now advocating has been on the Order Paper for four years in succession and it is interesting to note the advance which it has made in favour year by year. In 1935, the majority against it was 135; in 1936, it was loo100; and last year it was only 32. So, it would appear that by progressive stages we are educating the House of Commons in the view which we hold on this matter.
I notice that other hon. Members have a Clause of a similar kind on the Paper. It is not very different from that which I am now asking the Committee to accept. In fact I would not be against that Clause but it so happens that ours has been called first and we hope that those Members who have put their names down to the other Clause will support us. To pass this Clause will be a step in the right direction. It will show the country that we desire parents to give their children all the education possible, and if they can afford it to keep their children, after the age of 16, at schools or at any other establishment suitable for their training. The man who tries to give his children additional education after the age of 16 is doing something not only for the benefit of his family and himself but for the benefit of the State and if the State recognises that fact by giving him a rebate on his Income Tax in the one instance, I cannot understand why other forms of education should be excluded from that recognition.
We submit this proposal on an educational basis and we believe that if the Committee examine the Clause in that sense they will agree with it. As to the question of cost, I say that a principle like this ought to be accepted on its merits and that the question of cost ought not to enter into the consideration of the matter at all. I ask the Chancellor of the Exchequer to listen to the plea which will, I am sure, be made in favour of this Clause from all sides of the Committee. Last year the hon. Member for Stone (Sir J. Lamb) and several other hon. Members joined in the appeal then made to the Chancellor. Those of us who believe in reforms of this kind go on advocating them year after year. We


may be refused what we are asking for, but that does not remove from our minds the thought that what we advocate is right and will be accepted at some time or other. I ask the Committee in this case to grant the concession this year, if it is at all possible to do so.

6.0 p.m.

Mr. Ede: Each year since this Parliament has met, I have supported a proposal of this kind and have observed, with my hon. Friend the Member for Leigh (Mr. Tinker), the fact that the Committee is gradually coming round to an acceptance of the arguments which have been put forward, not from this side alone but from all parties. in support of that proposal. I desire to mention one or two issues which were not raised by my hon. Friend. There is no form of education which is less fairly distributed than technical education. One boy may live in a town and may be able to go to a technical school within a few miles of his home to receive his education. Another boy who happens to live in some other county or perhaps in some other part of that county which is remote from a school, cannot get this form of education, and his only way of acquiring technical skill and proficiency in his calling is to become apprenticed to some man in his village or town. It is ridiculous that the father of a boy who goes to a technical school to receive that form of instruction should receive exemption from Income Tax, whereas the father of the boy who is apprenticed does not secure such an advantage. If the question of the small payment which the boy receives is brought into account, it should be remembered that the boy attending a technical school may well receive the same amount as maintenance grant as the other boy receives during his apprenticeship. In many cases, therefore, these two boys are identical in everything except that, owing to the way in which formal educational opportunities are distributed, the one secures the benefit of this exemption for his father and the other does not.
There is another reason which ought to weigh with the Chancellor. We all deplore the way in which some parents send their boys into what turn out to be blind-alley occupations, merely because there is a comparatively high immediate wage paid when the boy leaves school.

The parent who is prepared to look beyond the immediate advantage to the family and to make some sacrifice in order that his boy shall get a thorough training in a useful occupation which will give him a trade in future life, deserves every encouragement that he can receive at the hands of the State. I advocate this proposal also because I believe that we want to make people of this country in all walks of life realise that these youths, whose abilities are mainly mechanical, are just as much an asset to the State as those whose abilities are on the academic, the literary and the mathematical sides. The right hon. Gentleman himself is a distinguished ornament of our university system, and, apart from politics, I am sure we all esteem him very highly in that regard. We could have wished that he could have gone to a better university, but for what it is worth we do realise that even Oxford was unable quite to spoil him.
Those of us who have had the advantage or disadvantage of a university education ought to be the first to recognise that in this modern complex world those people whose gifts are practical engineering, who apply to metal, wood and other material substances the theories that are taught in institutions of learning, are equally with us citizens of this country and entitled to be held in honour if they are applying their particular gifts to the problems of to-day and to the maintenance of this complex civilisation of which we and they are both parts. Anything which seems to put these people into an inferior category is wrong to-day when, more than at any other time, it is essential that we should emphasise the fact of their equal importance in the State with people whose minds run on theoretical and general lines. The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) has said that the late War was an engineers' war. Judging by what we can see going on around us on that side alone, the practical engineer is as important a man to-day as he was in 1914–18, and anything that we can do that will convince the people of this country that a person whose gifts are in the application of theory, even although they do not understand the theory, is equally important with the person who invents and teaches theory, is a good thing for the solidarity of the State.
The hon. Member for Hitchin (Sir A. Wilson), the hon. Member for South Salford (Mr. Stourton), the hon. Member for South Croydon (Mr. H. G. Williams), the hon. Member for Colchester (Mr. Lewis) and certain other hon. Members have on the Paper a new Clause which, I understand, achieves the same purpose as this Clause, except that it is in a different form of words. I had hoped that that would convince the Chancellor that this is not a matter which can be debated in the Committee in any party spirit, or that it is not put forward with any desire to benefit any particular class. It should be evidence that a feeling in favour of this proposal has spread in the Committee and that if he could make this concession he would be meeting the general view. If last year, when the majority for the Government on this issue fell to 32, it had been left to a free vote of the Committee, the new Clause would have been carried. I do not think that anything has happened that can alter the opinion of the Committee this year. If the right hon. Gentleman does not feel that he can give us the concession, I hope that he will leave it to the free vote of the Committee. The amount of money involved is so trifling that the right hon. Gentleman cannot plead that it would upset a Budget of r£1,000,000,000 to give a concession which, at the most, could not cost more than £2500,000.
If the argument is that if he gives way this year someone will ask him to give way next year on something else, or to make an extension, our experience on this side of the Committee is that the right hon. Gentleman has sufficient courage to refuse a concession when he does not want to give it; and I cannot see why a concession to argument this year should weaken him in any position he may have to adopt next year. I can think of no reason that can be adduced against this Clause that we have not heard in previous years. The Division last year indicated that the Committee, although it gave the Government a majority, was not convinced on the arguments that our case could be disproved. I hope, therefore, that to-day the right hon. Gentleman will find it in his heart to give the Committee—not my hon. Friend and those whose names are associated with him, but the Committee —the concession which three or four years

of steady argument show it is entitled to receive.

6.10 p.m.

Sir J. Simon: I have personally taken a good deal of interest in this subject. I remember very well the discussion last year, and I am impressed by what has been said to-day. If I feel difficulty about it, it is not for want of any appreciation of much of the reasoning that has been adduced. I have been responsible this year in the Budget and the Finance Bill for increasing very substantially the total charge of Income Tax, and I felt that it was very necessary to consider how to ensure that that increase should not bear with too great hardship on the smaller Income Tax payer. The Committee will recall that the form which the relief took was that the first £135 after exemptions and abatements would be charged, not at one-third of the standard rate as had been done previously, which would have amounted to is. io10d., but at Is. 8d. That is, of course, a very material relief for the smaller Income Tax payer, and I justify it and defend it. It means relief in the sort of household of which the hon. Member for Leigh (Mr. Tinker) and the hon. Member for South Shields (Mr. Ede) have been speaking. It means that instead of paying a tax of is. 10d. on the first £135, they are to pay is. 8d. That is to that extent a relief to them which I am very glad to have been able to make. It is very material because it leaves some 2,000,000 taxpayers out of 3,500,000 unaffected by the increase.
I regard this as a thing that we should discuss together, although the responsibility is that of the Chancellor of the Exchequer. It would never be right for me to throw a question like this at the Committee, for I am answerable in the sense that some other people are not for making the accounts balance and meeting the bills of the country. Before deciding to give this relief I surveyed the whole series of proposals that were made last year and the year before for the relief of the small Income Tax payer, and I came to the conclusion that on the whole the course that would do most good would be to keep the charge at is. 8d. for the reduced zone of income.
At the same time, I must say that this particular corner of Income Tax law dealt with in this Clause gives me some concern because I entirely share the view


that you do not want to draw a distinction between relief for one kind of education and relief for another. The proposal that was adopted some years ago by which the relief in respect of children did not stop, as it originally did, when the child became 16, but went on after the child continued in a school or college or the like for educational purposes, applied both for purely vocational training in a technical college as well as to literary training. The fact remains that, although it is not quite the same thing, I should very much like, if I could, to include the youth who is going through the ordered system of apprenticeship and is not bringing into the home anything more than a mere token amount, which, after all, is in some respects a very analogous case. It means in that case, as in the other, that probably there is a parent who is making a sacrifice for the future of the young man or young woman, instead of allowing the son or daughter to take some occupation which would give them some pocket money for a few years but leave them without any real permanent means of livelihood.
My difficulty in meeting these cases has really been that there is a distinct risk, I will not call it a danger, that if I make this concession I shall immediately have a whole number of cases like it pressed upon me in their turn as deserving of concessions, and find myself pressed to give away revenue which I really cannot afford to relinquish; but my own wish is to meet this "corner" if I possibly can. I could not accept the words of this new Clause without examining them very closely, but if I am given the opportunity I will see whether it would be possible, without sacrificing too much of the revenue which I must preserve, to find some suitable form of words to meet the case of the young apprentice who is not bringing into the home any substantial income but who is really carrying out his own education in a mechanical or engineering sense more or less analogous to that of the youth receiving other forms of education.
If I may be allowed to say so, I admire the pertinacity and the reasonableness with which my hon. Friend the Member for Leigh has tackled this question year after year. I have long been of opinion that there was a great deal of force in what he said, and my only reason for re

sisting was that I did not see how we could afford the concession or, if we granted it, how we could stop any extension, and I would call upon hon. Members now not to use this concession hereafter as a reason why I should give all sorts of other concessions.

Mr. T. Smith: Does the statement of the right hon. Gentleman mean that between now and Report Stage he will give this matter consideration and if possible put down a suitable form of words?

Sir J. Simon: Yes, that is what I mean. I must look at the question with my advisers and if I can see a way of framing a watertight Clause which does not give away too much money I shall put clown that Clause.

6.19 p.m.

Sir Patrick Hannon: I think it ought to be said from this side of the Committee how much we appreciate the statement which the right hon. Gentleman has just made. Many of us who have had a good deal to do with the promotion of educational facilities for working-class people in the past have felt deeply the points made by the hon. Member for Leigh (Mr. Tinker) and the hon. Member who seconded his Motion. In this House our sympathies are always on the side of widening the opportunities for the children of the wage-earning class to reach the highest possible level of education, and I think the undertaking given by my right hon. Friend will receive sympathetic support throughout the whole country. The question has been debated upon every Budget for several years, and the news that the Chancellor is going to give it consideration and to see whether there is a possibility of meeting the request will give just as much satisfaction to Members on this side of the Committee as on the other.

Mr. Tinker: After what has been said by the Chancellor of the Exchequer I beg to ask leave to withdraw the Motion.

Motion, and Clause, by leave, withdrawn.

NEW CLAUSE.—(Extension of s. 19 of Finance Act, 1920.)

Section nineteen of the Finance Act, 5920 (which, as amended by Section twenty-two of the Finance Act, 1924, and Section eight of the Finance (No. 2) Act, 1931, makes provision for a deduction in respect of relative


or other person taking charge of widowers' or widows' children or acting as housekeeper), shall be extended so as to apply to a person resident with an unmarried person in the capacity of housekeeper, and in the said Section the expressions "widower" and "widow" shall be deemed to include, respectively, a husband living apart from his wife and a wife living apart from her husband.—[Mr. G. Griffiths.]

Brought up, and read the First time.

6.20 p.m.

Mr. George Griffiths: I beg to move, "That the Clause be read a Second time."
We are very desirous that the Chancellor of the Exchequer should give the same consideration to this Clause as he has promised to give to the Clause put forward by the hon. Member for Leigh (Mr. Tinker) which has just been under discussion. In this case we feel that there is a real hardship upon certain people, and we want to remove that hardship. The Clause says that Section 19 of the Finance Act, 1920, shall be extended
to a person resident with an unmarried person in the capacity of housekeeper, and in the said Section the expressions "widower" and "widow" shall be deemed to include, respectively, a husband living apart from his wife and a wife living apart from her husband.
I see the hon. Member for Oxford University (Mr. Alan Herbert) in his seat. We have been told by the Press that the operation of the new Act dealign with divorce will mean that there will be more husbands and wives not living with each other, and they may require somebody to look after their children. The meaning of this new Clause is that if a man living apart from his wife has got a housekeeper he shall be regarded, as far as this question of Income Tax relief is concerned, as in the same position as a man whose wife is living with him, or as a widower who has a widow or spinster living in the house to look after the home and the children. I think the Chancellor of the Exchequer will see the force of this request. There is no doubt that people in this position have a grievance. A man has a housekeeper to look after the children but cannot get any relief from taxation in respect of that housekeeper. I shall not waste any more time in addressing the Committee, but I hope that someone else who will help me out in this matter may bring persuasive powers to bear on the Chancellor of the Exchequer

in order to melt his hard heart, so that instead of shaking his head he will say, "I give in."

6.24 p.m.

Captain Wallace: I dare say the Committee will have realised that it is not possible for my right hon. Friend the Chancellor of the Exchequer to adopt the same attitude to this new Clause as he did, to the general satisfaction of the Committee, to the last Clause.

Mr. G. Griffiths: It is only a little matter.

Captain Wallace: It is not so little as the hon. Member thinks. This is a proposal to extend the housekeeper allowance of £50 in two directions, first to unmarried persons and, secondly, to husbands and wives living apart. Under the Finance Act of 1920 the housekeeper allowance was confined to a widow or a widower with young children and to an unmarried person maintaining a widowed mother or other female relative to look after his young brothers or sisters. This was in accordance with the recommendations of the Royal Commission on Income Tax of 1920. Each year following the grant of this housekeeper allowance demands were made in this House and outside it to have that allowance extended to widowers and widows without children, but those demands were unsuccessful until the year 1924, when the then Chancellor of the Exchequer, who was a Member of the party opposite, decided to extend the allowance, increased from £45 to £60, to cases where there were no young children.
That change, which was effected by Section 22 of the Finance Act, 1924, has, perhaps not unnaturally, opened the door to further demands of the kind which the hon. Member for Hemsworth (Mr. G. Griffiths) is now making, namely, that the allowance should be available also to an unmarried person or to a husband and wife living apart. I think the Committee will appreciate that if we once go beyond the present position there is no logical stopping-place whatever, and that in this form of relief the admission of one claim only serves as a stepping stone to another. The case of a widower or a widow without children can to some extent be distinguished from that of the unmarried person on sentimental grounds—and sometimes we do pay attention in


this House to sentimental grounds. I have not the slightest doubt that individual cases of hardship could be adduced by hon. Members in all parts of the Committee in support of this particular concession, but I must remind the Committee that the personal allowances which Income Tax payers enjoy cannot be extended so as to cover all individual cases of hardship. These allowances purport to be allowances for the general body of taxpayers, and they must be judged by reference to the general case and not by reference to the particular individual case.
Actually, there is perhaps less reason for making this particular concession this year than there has ever been before because, as my right hon. Friend the Chancellor pointed out in dealign with the last new Clause, the smaller Income Tax payers this year, 2,000,000 people out of the 3,500,000 liable to Income Tax, are protected in this Finance Bill from the liability to increased direct taxation which will fail upon all the rest. Therefore, so far as these smaller incomes are concerned, and it is about them that the Mover of the Clause has been thinking, any extension of the personal allowances, such as would be the result of accepting this Clause, would have the effect of actually reducing the amount of taxation paid by many direct taxpayers this year as compared with last year. One may

wish to see, on general grounds of amiability and sentiment, liability to taxation reduced for everybody, but I do not think that on reflection the Committee will feel that there is a strong case, in a year when we have been obliged, with general consent, to place considerably increased burdens upon taxpayers as a whole, for selecting one particular class, and saying that it is not merely to retain the status quo, as 2,000,000 out of 3,500,000 Income Tax payers will do, but is actually to pay less this year than last year.

Sir P. Hannon: Will the right hon. and gallant Gentleman tell the Committee what would be the loss to the Exchequer in the finances of this year, if the proposed new Clause were accepted?

Captain Wallace: I regret to say that it is not possible to give a precise estimate of the amount. I am advised that it would be considerable. Whatever the amount would be, it does not affect the general argument which I addressed to the Committee.

Sir P. Hannon: It would be a substantial amount?

Captain Wallace: Yes, Sir.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 142; Noes, 220.

Division No. 253.]
AYES.
[6.31 p.m.


Adams, D. (Consett)
Edwards, Sir C..(Bedwellty)
Johnston, Rt. Mon. T.


Adams, D. M. (poplar, S.)
Evans, D. O. (Cardigan)
Jones, A. C. (Shipley)


Alexander, Rt. Hon. A. V. (H'Isbr.)
Frankel, D.
Jones, Sir H. Haydn (Merioneth)


Anderson, F. (Whitehaven)
Gallacher, W.
Jones, Morgan (Caerphilly)


Banfield, J. W.
Gardner, B. W.
Kelly, W. T.


Barnes, A. J.
Gibson, R. (Greenock)
Kennedy, Rt. Hon. T.


Batey, J.
Graham, D. M. (Hamilton)
Kirby, B. V.


Bellenger, F. J.
Green, W. H. (Deptford)
Kirkwood, D.


Bonn, Rt. Hon. W. W.
Greenwood, Rt. Hon. A.
Lansbury, Rt. Hon. G.


Benson, G.
Grenfell, D. R.
Lathan, G.


Bevan, A.
Griffith, F. Kingsley (M'ddi'sbro, W.)
Leach, W.


Broad, F. A.
Griffiths, G. A. (Hemsworth)
Leonard, W.


Bromfield, W.
Griffiths, J. (Llanelly)
Leslie, J. R.


Brown, C. (Mansfield)
Graves, T. E.
Logan, D. G.


Buchanan, G.
Guest, Dr. L. H. (Islington, N.)
Lunn, W.


Burke, W. A.
Hall, G. H. (Aberdare)
McEntee, V. La T.


Casselis, T.
Hall, J. H. (Whiteehapel)
MoGhee, H. G.


Chater, D.
Hardie, Agnes
Maclean, N.


Cluse, W. S.
Harris, Sir P. A.
MacNeill Weir, L.


Clynes, Rt. Hon. J. R.
Harvey, T. E. (Eng. Univ's.)
Mender, G. le M.


Cocks, F. S.
Hayday, A.
Marklew, E.


Collindridge, F.
Henderson, A. (Kingswinford)
Marshall, F.


Cove, W. G.
Henderson, J. (Ardwick)
Maxton, J.


Dagger, G.
Henderson, T. (Tradeston)
Milner, Major J.


Dalton, H.
Herbert, A. P. (Oxford U.)
Montague, F.


Davidson, J. J. (Maryhill)
Hills, A. (Pontefract)
Morrison, Rt. Hon. H. (Hackney, S.)


Davies, R. (Westhoughton)
Holdsworth, H.
Muff, G.


Day, H.
Hopkin, D.
Owen, Major G.


Dobbie, W.
Jenkins, A. (Pontypool)
Palign, W.


Dunn, E. (Rother Valley)
Jenkins, Sir W. (Neath)
Parker, J.


Ede, J. C.
John, W.
Parkinson. J. A.




Pearson, A.
Simpson, F. B.
Walker, J.


Pethick-Lawrence, Rt. Hon. F. W.
Sinclair, Rt. Hon. Sir A. (C'thn's)
Watkins, F. C.


Poole, C. C.
Smith, Ben (Rotherhithe)
Watson, W. McL.


Pritt, D. N.
Smith, E. (Stoke)
Wedgwood, Rt. Hon. J. C.


Richards, R. (Wrexham)
Smith, Rt. Hon. H. B. Lees-(K'ly)
Welsh, J. C.


Ridley, G.
Smith, T. (Normanton)
Westwood, J.


Riley, B.
Sorensen, R. W.
White, H. Graham


Ritson, J.
Stewart, W. J. (H'ght.n-le-SP' ng)
Whiteley, W. (Blaydon)


Roberts, Rt. Hon. F. O. (W. Brom.)
Stokes, R. R.
Wilkinson, Ellen


Roberts, W. (Cumberland, N.)
Strauss, G. R. (Lambeth, N.)
Williams, D. (Swansea, E.)


Robinson, W. A. (St. Helens)
Summerskill, Dr. Edith
Williams, E. J. (Ogmore)


Rothschild, J. A. de
Taylor, R. J. (Morpeth)
Williams, T. (Don Valley)


Salter, Dr. A. (Bermondsey)
Thorne, W.
Windsor, W. (Hull, C.)


Sanders, W. S.
Tinker, J. J.
Woods, G. S. (Finsbury)


Seely, Sir H. M.
Tomlinson, G.
Young, Sir R. (Newton)


Sexton, T. M.
Viant, S. P.



Silkin, L.
Walkden, A. G.
TELLERS FOR THE AYES.—




Mr Charleton and Mr. Mathers.




NOES


Acland-Troyte, Lt.-Col. G. J.
Eastwood, J. F.
Makins, Brigadier-General Sir Ernest


Agnew, Lieut.-Comdr. P. G.
Edge, Sir W.
Manningham-Buller, Sir M.


Albery, Sir Irving
Edmondson, Major Sir J.
Margesson, Capt. Rt. Hon. H. D. R.


Allen, Col. J. Sandeman (B'knhead)
Ellis, Sir G.
Markham, S. F.


Allen, Lt.-Col. Sir W. J. (Armagh)
Elmley, Viscount
Mason, Lt.-Col. Hon. G. K. M.


Anderson, Rt. Hn. Sir J. (So'h Univ's)
Emmott, C. E. G. C.
Maxwell, Hon. S. A.


Apsley, Lord
Emrys-Evans, P. V.
Mayhew, Lt.-Col. J.


Aske, Sir R. W.
Errington, E.
Mellor, Sir J. S. P. (Tamworth)


Astor, Viscountess (Plymouth, Sutton)
Evans, Capt. A. (Cardiff, S.)
Mills, Sir F. (Layton, E.)


Astor, Hon. W. W. (Fulham, E.)
Fildes, Sir H.
Mills, Major J. D. (New Forest)


Baillie, Sir A. W. M.
Fox, Sir G. W. G.
Moreing, A. C.


Balfour, Capt. H. H. (Isle of Thanet)
Furness, S. N.
Morris-Jones, Sir Henry


Beamish, Rear-Admiral T. P. H.
Fyfe, D. P. M.
Morrison, G. A. (Scottish Univ's.)


Beaumont, Hon. R. E. B. (Portsm'h)
Gledhill, G.
Munro, P.


Beechman, N. A.
Glyn, Major Sir R. G. C.
Neven-Spence, Major B. H. H.


Bernays, R. H.
Crofton, Col. Rt. Hon. J.
O'Connor, Sir Terence J.


Birchen, Sir J. D.
Gridley, Sir A. B.
O'Neill, Rt. Hon. Sir Hugh


Bird, Sir R. B.
Grimston, R. V.
Peaks, O.


Blair, Sir R.
Hambro, A. V.
Peat, C. U.


Bossom, A. C.
Hannah, I. C.
Perkins, W. R. D.


Braithwaite, Major A. N.
Hannon, Sir P. J. H.
Peters, Dr. S. J.


Brass, Sir W.
Harbord, A.
Petherick, M.


Briscoe, Capt. R. G.
Haslam, Henry (Horncastle)
Picklhorn, K. W. M.


Brown, Col. D. C. (Hexham)
Haslam, Sir J. (Bolton)
Pilkington, R.


Brown, Rt. Hon. E. (Leith)
Heilgers, Captain F. F. A
Ponsonby, Col. C. E.


Brown, Brig.-Gen. H. C. (Newbury)
Hely-Hutchinson, M. R.
Pownall, Lt.-Col. Sir Assheton


Browne, A. C. (Belfast, W.)
Hepworth, J.
Radford, E. A.


Bull, B. B.
Higgs, W. F.
Raikes, H. V. A. M.


Bullock, Capt. M.
Holmes, J. S.
Rathbone, J. R. (Bodmin)


Carver, Major W. H.
Hope, Captain Hon. A. O. J.
Rayner, Major R. H.


Cayzer, Sir C. W. (City of Chester)
Hopkinson, A.
Reed, A. C. (Exeter)


Cayzer, Sir H. R. (Portsmouth, S.)
Horsbrugh, Florence
Reid, Sir D. D. (Down)


Cazalet, Thelma (Islington, E.)
Hudson, Capt. A. U. M. (Hack., N.)
Reid, W. Allan (Derby)


Cazalet, Capt. V. A. (Chippenham)
Hudson, Rt. Hon. R. S. (Southport)
Romer, J. R.


Chamberlain, Rt. Hn. N. (Edgb't'n)
Hume, Sir G. H.
Rickards, G. W. (Skipton)


Chorlton, A. E. L.
Hunloke, H. P.
Robinson, J. R. (Blackpool)


Christie, J. A.
Hunter, T.
Ropner, Colonel L.


Clarry. Sir Reginald
Hurd, Sir P. A.
Ross Taylor, W. (Woodbridge)


Cobb, Captain E. C. (Preston)
Hutchinson, G. C.
Rowlands, G.


Colfox, Major W. P.
Inskip, Rt. Hon. Sir T. W. H.
Royds, Admiral Sir P. M. R.


Colville, Rt. Hon. John
James, Wing-Commander A. W. H.
Ruggles-Brise, Colonel Sir E. A.


Conant, Captain R. J. E.
Jones, L. (Swansea W.)
Russell, Sir Alexander


Cook, Sir T. R. A. M. (Norfolk, N.)
Keeling, E. H.
Russell, R. J. (Eddisbury)


Cooke, J. D. (Hammersmith, S.)
Kerr, Colonel C. I. (Mantras)
Salmon, Sir I.


Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)
Keyes, Admiral of the Fleet Sir R.
Salt, E. W.


Cooper, Rt. Hn. T. M. (E'nburgh, W.)
Lamb, Sir J. Q.
Sandeman, Sir N. S.


Cranborne, Viscount
Lambert, Rt. Hon. G.
Sanderson, Sir F. B.


Crooke, Sir J. Smedley
Latham, Sir P.
Scott, Lord William


Crookshank, Capt. H. F. C.
Law, Sir A. J. (High Peak)
Salley, H. R.


Cross, R. H.
Leech, Sir J. W.
Shaw, Captain W. T. (Forfar)


Crossley, A. C.
Leighton, Major B. E. P.
Shepperson, Sir E. W.


Crowder, J. F. E.
Levy, T.
Simon, Rt. Hon. Sir J. A


Culverwell, C. T.
Liddell, W. S.
Sinclair, Col. T. (Queen's U. B'lf'st)


Davidson, Viscountess
I. Ode, Sir E. Graham-
Smiles, Lieut.-Colonel Sir W. D.


Davison, Sir W. H.
Loftus, P. C.
Smith, Sir Louis (Hallam)


De la Bère, R.
Lyons, A. M.
Smith, Sir R. W. (Aberdeen)


Denville, Alfred
Mebane, W. (Huddersfield)
Somervell, Rt. Hon. Sir Donald


Dorman-Smith, Major Sir R. H.
MacAndrew, Colonel Sir C. G.
Somerville, A. A. (Windsor)


Draws, C.
MacDonald, Sir [...] (Inverness)
Southby, Commander Sir A. R. J.


Duckworth, Arthur (Shrewsbury)
Macdonald, Capt. P. (Isle of Wight)
Stanley, Rt. Hon. Oliver (W'm'Id)


Duckworth, W. R. (Moss Side)
McEwen, Capt. J. H. F.
Stourton, Major Hon. J. J.


Dugdale, Captain T. L.
McKie, J. H.
Strauss, E. A. (Southwark, N.)


Duggan, H. J.
Maclay, Hon. J. P.
Strauss, H. G. (Norwich)


Duncan, J. A. L.
Maitland, A.
Stuart, Lord C. Crichton (N'thw'h)







Stuart, Hon. J. (Moray and Nairn)
Walker-Smith, Sir J.
Winterton, Rt. Hon. Earl


Tacker, Sir R. I.
Wallace, Capt. Rt. Hon. Euan
Wise, A. R.


Tate, Mavis C.
Ward, Lieut.-Col. Sir A. L. (Hull)
Withers, Sir J. J.


Taylor, C. S. (Eastbourne)
Ward, Irene M. B. (Wallsend)
Wolmer, Rt. Hon. Viscount


Taylor, Vice-Adm. E. A. (Padd., S.)
Wardlaw-Milne, Sir J. S.
Womersley, Sir W. J.


Thomson, Sir J. D. W.
Warrender, Sir V.
Wragg, H.


Thorneycroft, G. E. P.
Waterhouse, Captain C.



Titchfield, Marquess of
Wells, Sir Sydney
TELLERS FOR THE NOES.—


Touche, G. C.
Whiteley, Major J. P. (Buckingham)
Major Herbert and Major Harvie


Tree, A. R. L. F.
Wilson, Lt.-Col. Sir A. T. (Hitchin)
Watt.


Turton, R. H.
Windsor-Clive, Lieut.-Colonel G.

NEW CLAUSE.—(Definition of the expression "controlling interest.")

The Fourth Schedule to the Finance Act, 1937, shall be amended by the addition at the end thereof of the following paragraph, namely-—
 For the purpose of this Schedule, the directors of a company shall not be deemed to have a controlling interest therein unless they are by their own shareholdings in a position to exercise or insure a majority vote at a general meeting of the company."—[Sir Irving Albery.]

Brought up, and read the First time.

6.42 p.m.

Sir Irving Albery: I beg to move, "That the Clause be read a Second time."
My reason for proposing this Clause is that my attention has been drawn to the fact that there is no definition in the National Defence Contribution provisions of the 1937 Finance Act of the expression "controlling interest." I am told that as a result there are very considerable differences in the treatment by different inspectors according to the interpretation which they put upon the term. If the ideal to be aimed at is uniformity of treatment in the incidence of taxation, it seems to be highly undesirable that different inspectors should be left to use their own judgment in this matter, as at present. The result is that in some cases there is a wide definition of controlling interest, relating to directors fees and other charges, while in others, inspectors apply a much narrower definition. It must be to the advantage of everybody that some precise definition should be framed. I know that it is always difficult for a Private Member to draft a new Clause, above all to a Bill which is so technical as this, but I am not tied to the words which I have put upon the Paper and if the Chancellor of the Exchequer agrees that it is desirable that there should be a. definition and decides to consider the matter, he may be able to suggest a more appropriate form of words.

6.44 p.m.

Sir J. Simon: I am afraid that I cannot accept this proposal. My hon. Friend

is quite right when he says that there is at present on the Statute Book no definition of the term "controlling interest," but I think I can satisfy the Committee in a very few words that this is one of the cases in which it is better not to attempt to lay down a long and elaborate definition. The very purpose of the test is that it should be applied in connection with the National Defence Contribution in cases in which the directors of the company have a controlling interest. In such a case the deduction allowed for the remuneration of those directors is limited, as regards whole-time directors, to 15 per cent. of the profits. Otherwise, if the directors had a controlling interest, they could vote the whole of the profits to themselves as directors' salaries. If my hon. Friend will consider this case, which is not the most complicated case that might arise, I think he will see at once that a definition would be inadvisable. Suppose that, in company A, the whole of the shares are owned by two persons, and that company A itself owns all the shares in another company, B. In these circumstances, the two persons who own all the shares in company A can manifestly secure that they are appointed directors of company B, but they will not hold any shares in company 18 at all. Being the only directors of company B, they will have control of it, and can vote the whole of the profits of company B as remuneration to themselves as directors. My hon. Friend suggests that we should say that no one should be regarded as a director having a controlling interest unless his own shareholding in the company is in a majority, but, in the case I have put, the directors would not hold any shares at all.
The truth is that there are a good many cases where it is much better to rely upon a fairly plain, intelligible phrase, and trust to its being applied to the particular circumstances of the case, than to go about the frightfully difficult business of attempting a complete, absolute and watertight definition. As a matter of


fact, this phrase "controlling interest" has been used before in our tax law without any definition. A very well-known revenue judge, Mr. Justice Rowlatt., said it seemed to him that "controlling interest" was a phrase that had a certain well-known meaning. He went Ion to describe what it meant, and added that he found no difficulty in applying it. I think it would be better, in determining whether in any individual case directors have or have not a controlling interest, to leave it to the good sense of the Special Commissioners or the General Commissioners, as the case may be. My hon. Friend will remember that it is not determined merely by an inspector. If his decision is not thought to be right and reasonable, it can always be decided, in case of difficulty, by a very skilled and impartial authority. I think we must all have a pretty good idea of what is a controlling interest. One is reminded of the observation of the wise man who said that he was quite unable to define an elephant, but that, if he met one, he knew it when he saw it.

Sir P. Hannon: The Chancellor has spoken of an impartial authority. Might I ask what sort of impartial authority he has in mind?

Sir J. Simon: I was thinking of the Special Commissioners, who are a judicial tribunal spending their whole time in administering the Income Tax laws and similar laws as between taxpayers and the Revenue.

6.50 p.m.

Mr. Maitland: This proposed new Clause, to which my name is attached, was put down, not so much in view of the type of case which the Chancellor had in mind in 1937, but rather to be quite certain that those people who have not a controlling interest are not unfairly treated. I should like to ask the Chancellor whether, after his experience, he is satisfied that there are substantially no grounds for thinking that anyone is being unfairly brought within the purview of the provision in question.

Sir J. Simon: I have not had my attention actually drawn to any such cases. If either of my hon. Friends knows of any, I shall be very glad to look into them, but I think that what has been said to-day will help to clear away any misunderstanding. I will have the work

ing of the Section watched, but I am strongly of opinion that it would be advisable to make no change at present, and I hope very much that a practice will be established which will be found to be satisfactory.

6.52 p.m.

Sir John Mellor: The Chancellor has given us by means of a particular instance a destructive criticism of the terms of the proposed new Clause, but I do not think he has made out quite so convincing a case for having no definition at all of what is a controlling interest. I do not think that this matter ought to be left as a question purely of fact for the decision of the court. I suggest that, unless the House of Commons knows its own mind, it is very difficult for the courts to make up their minds with any degree of confidence, accuracy and consistency as to what the term "controlling interest" should imply. The Chancellor has told us that a very learned judge, Mr. Justice Rowlatt, has succeeded in describing quite clearly what a controlling interest means. If that be so, I should not have thought it was beyond the power of the draftsmen to reduce that description to the form of a Clause. I suggest that, the more the legal implication of such expressions is left indecisive, the more litigation we are likely to have, and such litigation is apt to be highly expensive to the taxpayer.

Sir I. Albery: In view of the fact that we have had so far very little experience of the working of the National Defence Contribution, and in view of what the Chancellor has said, I beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Charge of national defence contribution not to apply to industrial and provident societies.)

As from the first day of April, nineteen hundred and thirty-eight, Section nineteen of the Finance Act, 1937 (which relates to charge of national defence contribution), shall not apply to any trade or business carried on by a society registered under the Industrial and Provident Societies Act, 1893, unless such trade or business is carried on by a society existing primarily for the purpose of earning and distributing profits on its capital.—[Mr. Barnes.]

Brought up, and read the First time.

6.55 p.m.

Mr. Barnes: I beg to move, "That the Clause be read a Second time."
I should like to claim the indulgence of the Committee for making, perhaps, a rather longer statement on this Clause than is customary during our finance debates. I do not think the Chancellor will begrudge that, because he has made very satisfactory progress so far, and I assume that many Members in all part of the Committee would like to find an acceptable solution for the problem of the surplus of co-operative societies in relation to their Income Tax liability. The purpose of this Clause is not an innovation in connection with the National Defence Contribution, because the Chancellor himself has allowed many exemptions to important groups of trades that might have come within the ambit of this tax.
I should like to remind the Committee of the various groups of exemptions or modifications which the Chancellor himself has initiated. First of all, there is the category of complete exemptions. Provision has been made for the exemption of public utility corporations and all small business undertakings—although I do not think the description "small" can really be applied to the whole of them—whose profits are under £2,000 a year are also completely exempted from this charge, as well as businesses the heads of which are professional persons. Then we have the partial exemptions or modifications, under which companies whose profits are under £12,000 a year come under a graduated scale. Building societies have been met by a special arrangement which has considerably reduced their contribution, and there are also modifications in the case of private companies and certain groups of policy holders in insurance companies. The third category consists of those companies which have to pay the full charge of 5 per cent. of their taxable profits.
The Chancellor himself, in describing the operation of National Defence Contribution in the case of the third group of companies, which have to meet the full obligation, said that the tax was in the nature of an increase of one-fifth, or 20 per cent., in the Income Tax liability of traders. Language of that description conveys a very natural and legitimate impression that no trading body would have to pay more than one-fifth of the sum that it now pays, whereas, owing to the alteration of the practice of the Treasury with regard to co-operative societies in dealing

with the interest sum administered within a co-operative society, this is now taken back into the charge for National Defence Contribution purposes, which means that a good many of our co-operative societies in fact pay more than one-fifth of the sum which they now pay in Income Tax. Therefore; many co-operative societies fall into a fourth category, and are subject to the incidence of this tax in a much more severe form than the Chancellor himself led the House to believe would be the case. I do not think, unless evidence can be submitted to the contrary, that any public company would have to pay more than one-fifth of the sum that it now pays in Income Tax—

Sir P. Hannon: If the hon. Member's argument proceeds on these lines, I think he ought to give to the Committee examples of the instances in which the contribution of co-operative societies is more than one-fifth.

Mr. Barnes: I shall be delighted to do that later on in my remarks, if the hon. Member will do me the favour of listening to the argument. I felt that it was desirable, first of all, to deal with the four groups for the purpose of bringing out the point that, if my contention is correct and some societies do pay more than one-fifth of their present Income Tax payments, it stands to reason that there must be some circumstances in regard to cooperative societies that are different from the general experience, and it is that information that I desire to bring out. There are two factors which, in the case of co-operative societies, produce that difference. One is the fact that the wages or incomes of 8o per cent. of our members or shareholders are below the Income Tax assessment limit. That would not prevail in any other trading corporation.
The second fundamental difference between a co-operative society and an ordinary trading corporation is the fact that practically the whole of our surplus arises from mutual trade, and, therefore, is not profit for taxation purposes. Dividends, in any case, are not taxed, and our members who are eligible to pay Income Tax on their own individual incomes include the interest that they get from co-operative societies in their returns. In 1933, before the alteration in the law, co-operative societies paid the full rate of tax under Schedules A and B, and the Board of Inland Revenue at that


time stated clearly and specifically that there was no loss to the Revenue as the result of that practice. In fact, in 1933, when we were in direct negotiation with the then Chancellor of the Exchequer, now Prime Minister, a special test was carried out throughout the whole of our retail societies and we were able to prove that, in paying the full rate under Schedules A and B, no society was escaping its burden of taxation in any way, although one or two of our federal bodies, owing to the fact that special circumstances represented a measure of nonmembers' trade, could not be brought within that category, but we made an offer for special arrangements to cover those exceptional cases. The Board of Inland Revenue in 1919 said:
The surplus that arises in a mutual concern from transactions with members, though it is sometimes described as profit, is not a profit chargeable to Income Tax. The Board of Inland Revenue are aware that this fact has at times been challenged, but the question is one of law, and, as such, the Board are advised, in the light of decided cases, it admits of no reasonable doubt.
This does not rest merely on the opinion of the Board of Inland Revenue. There were certain cases decided in the courts, in one instance in the case of the New York Life Insurance Company and in the other of the South-West Lancashire Coalowners, Limited. In the discussion on a previous Clause the Chancellor quoted the decision of Mr. Justice Rowlatt as an authoritative opinion which should guide the decision of this Committee. We observe from the cooperative angle that, if our case has been supported by many important appeal test cases in the House of Lords, the decisions of the courts have been overridden in our case and will not be considered from the angle of our claim. Then it is important to note that the present Chancellor, in his capacity not as politician but as one of the most eminent lawyers in the country, gave the following opinion in 1920:
The main object of the co-operative society is to prevent any profit from arising at all. It is clear that the whole of the balance is nothing more than money provided by the members in excess of what was, as it turned out, actually required for the purchase of the goods, and there is in principle no difference whatever between that part of the balance that is handed back to the members as being not required and those parts with which their consent are used for purposes which are

incidental to the operations of the society over and above the mere purchase of goods. None of this money can possibly be called a profit either of the society or of individual members.

Sir P. Hannon: On a point of Order. The Clause has relation to the
Charge of National Defence Contribution not to apply to industrial and provident societies.
The argument on which the hon. Member is now proceeding relates to the whole question of the extent to which the mutual earnings of a co-operative society should be subject to Income Tax. The argument ought to be directed to the responsibility of a co-operative society trading on the principle of mutuality to make its contribution for national Defence, and not to the general circumstances in which a cooperative society ought to be subjected to Income Tax.

The Chairman (Sir Dennis Herbert): The National Defence Contribution being based upon the machinery of the tax, I cannot at present see that there is anything out of order in what the hon. Member has said.

Mr. Barnes: That is the real point to which I am leading up, that if it were not for this position, automatically co-operative societies would have been without the charge of National Defence Contribution, and it has an important bearing on the case that I propose to make later. This is emphasised by the next opinion that I wish to quote of the right hon. Gentleman in his capacity as Chancellor of the Exchequer last year:
In 1920 I was asked to give an opinion on a matter affecting co-operative societies. The question then put to me was this. Here is a tax described as a tax on profits. Will you tell us whether, in your view, and with your knowledge of the law, this is a tax which will catch the co-operatiev societies? ' The answer was—and I think it was perfectly accurate—' The law does not regard as profit for the purpose of such a tax as this the advantage which co-operative societies make, and therefore we think that co-operative societies gains—I want to use a neutral word —will be exempt.' That was a perfectly correct opinion and I hope it was worth the money. What has happened in regard to National Defence Contribution? Years afterwards Parliament took up this subject and altered the law. I am not saying whether it was right or wrong.
The Chancellor did not advance an opinion, but he made it quite clear that Parliament altered the law specifically in


this case to apply to co-operative societies.
I hope I have made it plain, even to the hon. Member, that when I was asked in 1920 whether, seeing that the law was so-and-so, would so-and-so happen, I gave a correct answer. I am now pointing out that in 1933 the law was altered.
That means that in this case Parliament overrode the courts' decisions, the opinion of the Board of Inland Revenue, and the opinion of one of the most important lawyers in the country at the time. If this had not been done we should not be discussing this issue to-day. The application of National Defence Contribution to co-operative societies emphasises the injustice that we suffered on that occasion, and the fact that it falls with greater severity on co-operative societies should bring home to the Committee the undesirability of further emphasising this inequity. Now it has come to the application of the National Defence charge to co-operative societies. It is the surplus a rising from mutual trade which is affected by this charge, less the sum paid out in dividends. The investment income is not affected. When we come to the administration of the National Defence Contribution charge, not only in our case but in the case of all trading corporations, certain allowances are provided within the present administration of Income Tax law. Allowances include wear and tear, interest on loans, pension funds, and similar expenditure. Again, as indicating that the Chancellor has made a variety of modifications and has not adhered strictly to previous practice with regard to Income Tax law in the case of National Defence Contribution, there are certain other allowances which are admitted which do not apply for ordinary Income Tax purposes. For instance, I understand that allowances are admitted for ground rent, royalties and annuities. If the Government can see their way to exempt certain groups of traders, if they can modify the charge to one group, if they can widen the scheme of allowances to corporations, why are they so adamant in refusing to meet the claim that we are putting forward, first, that we should not be charged National Defence Contribution, secondly, if we are, that in our case the interest charge and the alteration of Treasury practice should not be proceeded with? In our case the modification has not been to our advantage, while the modifications in every other direction have

eased the burden of the paying body. The one charge that is applied in our case has added to the severity of the burden, and that is a very definite disadvantage.
Now I come to specific cases. Taking a society which I will call A, its Income Tax liability this year will amount to £126 10s. With the total charge for National Defence Contribution added, it is £407 14s. The Income Tax charge of society B less National Defence Contribution is £178, with National Defence Contribution added it will be £412. I agree that they represent the exceptional type of case; but let me now quote the normal case of a Midland society of very large dimensions, with 6o0,000 members. Its Income Tax charge will amount to £7,000, while its National Defence Contribution charge will amount to 3,000—that is 42.8 per cent. of its Income Tax payment, whereas the Chancellor endeavoured to convey the impression that no company would pay more than one-fifth of its Income Tax payment. I do not think hon. Members can defend a situation of that character.
Let me further illustrate it by taking the comparison of the building societies. I claim that a co-operative society conveys far greater social benefits to the public than a building society, although I do not wish to under-estimate the value of the part that building societies play in our national life. I am chiefly quoting this because last year the Chancellor made a special modification which has the approval of this Committee. In building societies there are just over 2,000,000 shareholders, while there are 8,000,000 shareholders in co-operative societies. The share capital of building societies is £480,000,000. The share capital of cooperative societies is approximately I£150,000,000. Although the shareholders of the building societies number only one-fourth of those of co-operative societies their share capital is immeasurably greater. The average capital holding of a shareholder in a building society is £240, and the round figure of interest which the individual member draws is in the neighbourhood of L£8 a year. The average shareholding of members of co-operative societies is £18, and the average share interest drawn works out at 15s.
It is this small sum of interest per member—but which in the aggregate case of the millions of members amounts to


a large sum—that is added together for the purpose of the National Defence Contribution charge, and which throws the whole Income Tax payment out of proportion. I say that that is grossly unfair. I am confident that there is not a Member of the Committee who would allow that to operate in any other form of business, and, if it were not for the prejudice developed in this direction, it would not be allowed in this case. When we come to the operation of National Defence Contribution in regard to the building societies, the Committee should remember that it was the original intention of the Chancellor to apply the full charge. What happened? It will be observed that the trade of the building society is in capital advances entirely. The whole of that £480,000,000, therefore, constituted, as it were, the trade of the building societies. The sum they would have to pay under National Defence Contribution would probably have amounted to £750,000 a year—an impossible and inequitable charge on building societies. I want to make it perfectly plain that cooperative opinion fully agrees with the special arrangement the Chancellor made for building societies. We would, in fact, go further and say that if public utility companies are entirely exempt, building societies should be. That is not my point for the moment.
When you come to depositors, cash loan holders, of building societies, you find that the value of their loans amounts to £141,000,000. I would ask the Committee what would have been the position if the figures had been reversed, and the share capital had been £141,000,000 as against loans of £480,000,000? The problem would not have arisen in regard to building societies. It is this problem of share interest which distorts the whole thing. That vast sum which the Chancellor originally proposed to collect from building societies confronted them with this problem. They had only three ways of dealign with it: either to raise the guaranteed interest rate to borrowers, to take the money out of reserve, or to reduce the interest rate to depositors. If they had adopted the first, it would have had a most adverse effect on the incentive to people to purchase their own houses. The second was impossible; the sum was so large that it would have made

them financially unsound in a very short period. The third would have put them out of the market so far as attracting capital to that particular form of investment was concerned. The Chancellor was wise to recognise this and make that special arrangement. But if the Committee agree with the wisdom of that decision, as they do, it removes any possibility of hon. Members disagreeing with the proposal I am now putting forward, because our case rests not only on the same facts as the case of the building societies but on wider, stronger and more comprehensive facts.
Both in the case of building societies and of public utility societies, the person who invests capital does so in order to make a profit out of providing a service to another body of persons. In the case of shareholders of co-operative societies, they do not make their surplus through trading with another body of people; it arises through trading with themselves. Again, if the Chancellor admits the exemption to public utility societies and a modification in regard to building societies, he has not the slightest ground for refusing our contention with regard to co-operative societies. If you take the shareholders of building societies, more than 80 per cent. pay Income Tax as individuals, whereas more than 80 per cent. of the members of co-operative societies do not pay Income Tax, because they are too poor.
We advanced in the Debates last year numerous and specific examples of companies that one would assume came within the definition of public utilities, to indicate the considerable profits which these organisations made and to prove, by the dimensions of those profits, that service to the public was not their primary object and consideration. We obtained no information from the Chancellor last year as to what type of organisation would come under this heading. I would invite the Chancellor definitely to state what is the test applied to transport, electricity or gas companies, or water boards to see whether they come within this category. Then we can judge this problem more from the angle of equity. If one tests the profits of almost all these types of company that the public generally classify as public utilities, it will be found that their profits vary between 7 per cent. and 20 per cent.; and they are in the habit of distributing periodically large cash and


capital bonuses. Will the Chancellor please state what test the Treasury apply, so that one may not make public statements that are not founded on fact in discussing this matter?
May I bring my remarks to a close by putting a number of further points to the Chancellor? On what ground is he justifying the exemption of the whole category of smaller traders that represent a very powerful competitive element in the distributive trades, whose profits may reach up to £2,000 a year? A business earning £1,800 or £1,900 a year may have a capital outlay of £100,000 to £20,000. How can the Chancellor exempt that type of business, and continue to charge National Defence Contribution to the smallest trader in the community, the individual member of the co-operative society, whose individual capital averages only £18 per member, and whose average interest drawn amounts to only 15s. a member? There must be many of our members who do not hold that amount of capital and draw that amount of interest. If the Chancellor can justify the exemption of public utility societies, which represent one of the soundest units of investment to-day, on the ground of their service to the public and limitation of interest—although their interest limitation is very high—on what grounds does he justify this continuance of taxation on co-operative societies, which operate on a limitation of interest much lower than these public utility corporations—usually operating on 3 per cent., and practically never more than 4 per cent.? If the Chancellor can justify exemption of building societies in order to enable people to buy their own houses, why is he so adamant in regard to co-operative societies, which assist people to buy their own food, clothing and furniture, to make their homes a little more comfortable to live in?
I would urge the Chancellor to accept this Clause. If he is unable to see his way to do so, I hope the Committee will press the point upon him. I would remind the Committee that the membership of the co-operative societies represents a very laudable effort on the part of the great working classes of this country to share the general sense of independence that is characteristic of our people, who have learned that, except by directing their purchases through a co-operative society, they would be unable to secure part in the ownership of the industrial

and commercial life of the country, and who have discovered that the accumulation of their dividends helps them to maintain themselves during unemployment. The accumulated dividend is a valuable asset in a time of sickness, and many people anxious to give their children a better education than they themselves enjoyed use this accumulated dividend to meet some of the excessive expenditure on education that their weekly wages do not permit.
Many of them, in their efforts to buy their own houses under the intolerable conditions that prevail in the housing of the working classes to-day, fall back on these sums that they have accumulated in the co-operative societies to pay the very heavy mortgage interest rates, and many of them find this accumulation valuable to meet their rates to the local authorities. It assists also in the payment of insurance premiums, and at times, when heavy items fall in replenishing the family boots, clothing, and furniture, the co-operative society, above any other type of commercial organisation, helps the millions to meet this need. When you compare the service of public utility and building societies, professional bodies, and others, I say there is no comparison with the social service and value of the co-operative movement, and if this Committee is not lost to all sense of justice, it will accept this Clause.

7.33 P.m.

Sir P. Hannon: Before the Chancellor replies to the very interesting and indeed exhaustive speech which has been made by the hon. Member for East Ham, South (Mr. Barnes), may I, as an old cooperator, the oldest co-operator in this House, offer a few comments on the case which he has submitted? Is the Committee to understand that the Co-operative movement as it exists to-day is to make no contribution at all to national defence? Is it the argument of the hon. Member that because the Co-operative movement is trading on the lines of mutuality, it is not to take its part in making the necessary financial provision for the defence and security of the people of this country in the future? The hon. Gentleman would indicate to the Committee that the trading side of the Co-operative movement is a sort of sacrosanct section of the community to whom the ordinary obligation of contributing to the defence of the


country must not apply. That seems to me to be a very hopeless case to put before this Committee in the present exigencies of the State.
But the point that I would like to submit is this, that the Co-operative movement, as it exists and carries on its trading activities to-day, has departed very far from the original idea of the cooperators who were responsible for the foundation of the movement in the past. The Co-operative movement to-day is a trading community, in actual, direct, and positive day-to-day competition with masses of small traders all over the country. Take the great co-operative society in my own city of Birmingham, a most successful body, prosecuting its activities over many years on the most carefully considered business lines, acquiring large blocks of property from month to month, and exercising all the rights and privileges and taking advantage of all the opportunities of the ordinary business corporation in competition with the private trader outside. I do not take any exception to that, but what I take exception to is that if co-operative societies depart from the old principle of regulating their trade among their own members, and go into competition outside, taking pages of the daily papers to advertise the advantages that they can present in competition with the private trader of this country, who, after all, deserves some consideration from this House of Commons, I think the Committee ought to be very careful before it allows itself to accept a proposition of this kind.
There is no real comparison between the position of the building societies and that of the co-operative societies. If the Co-operative movement in this country were conducted on the original principles upon which its founders stood, men with whom I co-operated in my younger days, men like George Jacob Hoiyoake., Vansittart Neale, Owen Greening, and others, Members who were in this House in the earlier years when I was here, we should all agree that exceptional consideration should be extended to it in relation to the imposition of national taxation, but the Co-operative movement today is a great business concern, competing with every private trader in the country, sending its ships overseas, acquiring great harbour facilities, controlling

rates on railways. The Co-operative Wholesale Society in Manchester is one of the most influential bodies in this country, not merely from the economic standpoint, but from the political standpoint also, and I think this Committee ought to be extremely careful in lending its authority to the acceptance of a Clause of this kind, which would place the Co-operative movement as a whole in a position of exceptional preference in relation to the collection of the national revenue. Members of the Co-operative movement have the same obligation, whether they are shareholding to the extent of X18 or whatever it may be, to take their part in sustaining the national revenue and providing for the national defence as any other citizen of this country, and I think it almost amounts to sheer impertinence for the Co-operative movement to come here and ask to exempted from the general obligation which applies to every citizen of this country to take his part in defending his country in the difficult circumstances in which we find ourselves to-day

7.39 p.m.

Sir J. Simon: I am glad that the Committee should have had the vigorous speech from the old co-operator who has just sat down. I will not say that I stand as a neutral between the rival parties in this matter, but I would like to state two or three considerations which I think will really show the Committee that they should not exempt from the National Defence Contribution the cooperative societies and the Co-operative movement. The hon. Member for East Ham, South (Mr. Barnes) has made, as he always makes on this subject, an extremely well-composed and well-informed speech. He has assembled the points, but he will not think any the worse of me if I say that I think he has assembled them rather from his point of view.
May I first get rid of what I have always thought to be a rather ridiculous hare? Certain observations have been made about an opinion which I gave in 1920 as to whether or not the proceeds or surplus of a co-operative society would be liable to, I think it was, Corporation Profits Duty. Although I would not say it of every legal opinion that I have given, that particular legal opinion was, I believe, perfectly right. There is no doubt that I was quite right


when I said, when asked in 192o, "Do you consider that the profits or proceeds of our co-operative societies are caught by that tax?" that I did not think that they were so caught. The argument was that any surplus resulting from "mutuality trading," as my hon. Friend the Member for Moseley (Sir P. Hannon) called it, in the sense that all the members of the body were trading with one another, was not what are called profits for the purposes of the Corporation Profits Tax. I do not wish to withdraw from that view in the least, and if I was to be remembered by nothing else than by that opinion, I should be content that that opinion was correct. But it was not for me or for anyone else to prophesy what, 13 years later, would be done by the Imperial Parliament, and 13 years later, in the Finance Act of 1933, Parliament enacted this Section:
In the application to any company or society of any provision or rule relating to profits or gains… any reference to profits or gains shall be deemed to include a reference to a profit or surplus arising from transactions of the company or society with its members which would be included in profits or gains for the purposes of that provision or rule if those transactions were transactions with non-members.
I think we shall all say that the moment that Parliament enacted that in 1933, we had this situation, that things which till then were not profits, because they were the proceeds of a co-operative society, became by the very language of Parliament profits for the purpose of Income Tax. Whoever may be to blame for that, a poor, miserable, struggling lawyer, writing an opinion in 19200, cannot be blamed for it at all.

Mr. Alexander: The right hon. Gentleman was also a Minister in the Government that made the alteration. In the opinion that the right hon. Gentleman gave to the Co-operative movement in 1920, it is true that he stated the legal position, but he also argued that the proceeds of co-operative societies could not on any rational ground be said to create a taxable surplus.

Sir J. Simon: That is perfectly right, but we must pay due respect to the enactments of the Imperial Legislature, which in 1933 proceeded to say that, for purposes of Income Tax, the surplus, as it was called, of a co-operative society should count as part of the taxable profits

of the society. And I must say, since the right hon. Gentleman interposed just now, that if you consider the common sense of the position, it would be, I think rather remarkable to take three great enterprises which have been mentioned as all sharing in a common public service, that is to say, Messrs. Joseph Rank and Company, Messrs. Spillers, and the Co-operative Wholesale Society, three great bodies which lent their aid on equal terms to help the Government in getting food supplies—and we are all grateful to all of them—I think it would be very remarkable if, as a matter of fact, when we all have to make our contribution, having regard to our resources and abilities, we were to say that two of those bodies ought to make contributions to the national defence, but that the third of them should not. That would be against every possible judgment of common sense. I quite agree with the view taken. You have drawn a distinction, and I have always admitted that on that basis it is quite honest and that, if you use strict reasoning, it is perfectly arguable. But we are a fair people in this country—we do not want to victimise—and on the whole we thought it right and reasonable to ask for a contribution of Income Tax by co-operative societies. So much for that.
Will the Committee please observe what follows from that? You would almost have supposed that as the National Defence Contribution is now on the Statute Book, having been enacted last year in the Finance Act, you might think that there was a provision which said that the co-operative societies should also, and especially, be made to pay National Defence Contribution. There is not a word about them in the Statute from beginning to end. They are not mentioned. The reason is that the National Defence Contribution was levied by Parliament upon profits arising from a trade or business in each accounting period, such profits to be computed on Income Tax principles. Since in 1933 Parliament laid down that the surplus of co-operative societies shall come within the conception of profit, it follows that when you got the new tax put upon profit arising from a trade or business computed on the Income Tax principle, automatically co-operative societies had their contribution to make. Therefore, the hon. Gentleman is press-


ing upon us that we should insert in our legislation about National Defence Contribution a special clause which would specially exempt people who automatically fall under it.

Mr. Alexander: That is perfectly true.

Sir J. Simon: That, I think, is the real answer to the question. Is the surplus of the co-operative societies to be regarded as profit? The answer is, that by the deliberate act of Parliament in 1933, it undoubtedly is. The next question which arises is one which the hon. Gentleman also developed last year, when I did my best to deal with it. He has repeated it., which is quite natural, and I must, therefore, repeat my explanation. He says that the National Defence Contribution calls for a contribution from co-operative societies on an exceptional principle which really results in their having to bear a larger burden than they ought to bear. In order to understand this point it is necessary to give an example, and I am going to give the same example as that which I gave last year. With great respect to the hon. Gentleman, whose knowledge of the subject I very sincerely acknowledge, this is really all based on a confusion.
Let us suppose that there is a successful co-operative society, and for the purposes of what I am saying I speak of profits, as it is no good continually using a different phrase. Suppose a co-operative society during a given period makes £I00,000 profit, and suppose it distributes, say, £60,000 of that sum as interest on share capital to its shareholders, and it keeps undistributed the balance, namely,£40,000. As the hon. Gentleman pointed out just now, quite correctly, the Income Tax to be applied to that co-operative society would be applied in this way. As far as drawing the cheque is concerned, the co-operative society would pay Income Tax on £40,000, and perhaps it is more convenient to take 5s. in the £— though unfortunately that is not the rate at the moment—because it is an easier calculation to make. The cheque in respect of Income Tax at 5s. in the £ on £40,000 would be £10,000. Now says the hon. Gentleman "Yes, but the National Defence Contribution of the cooperative society may be more than one-fifth." The reason of the Income Tax is

this; and it is to be found in the Act of 1933. That Act provides that the figure on which the co-operative society has to be charged is £100,000, but it is to be treated as having met the claims of the Revenue if it first distributes a portion of that surplus to its shareholders, that is, £60,000, and draws a cheque in respect of tax on the balance.
An exactly similar thing happens in the case of the ordinary limited company. Take a limited company which makes £100,000 profit. It also is charged Income Tax on the £100,000, which would be £25,000, but if it declares a dividend and distributes £60,000 out of the £100,000 to its shareholders, it deducts from the shareholder the 5s. in the for Income Tax. To that extent it recoups itself, and what the limited company itself bears in tax is, in the end, tax on what it does not distribute. That is to say, it is taxed on £40,000 which is £10,000. The two cases are exactly the same in the result. The difference is a difference of machinery, and it is due, as the hon. Gentleman said, quite justly, to the fact that it was realised that a very large number of the members of co-operative societies are poor people who even if they bear the tax in the first instance get it back. There are a great many limited companies who have also shareholders who are poor people, and there is no difference at all between the burden of the Income Tax on a limited company and the burden of Income Tax on a co-operative society. The figures are the same.
The real criticism, if it is a criticism, as I pointed out last year, of National Defence Contribution—and with great respect to the hon. Gentleman, that is not the point which he urged—is that the tax simply does not pay any attention to the question as to how many fractions the money to be distributed is divided into, or whether the people who get the money are small shareholders or small co-operators or persons above or below the Income Tax limit. It really is a complete delusion to suppose that something special is being done in the case of co-operative societies. Except as a mere matter of machinery, the arrangement since 1933 is as I have described it. The result is that if we accept the view taken in 1933 we must regard them as making profits, and if we accept the provision of last year that National Defence Contribution is a tax upon


trading profits made by enterprises in this country, there really is no justification at all for claiming that co-operative societies should be excluded from that tax.
Co-operative societies enjoy, as they are perfectly entitled to, the concessions incorporated in the National Defence Contribution in various respects. For example, the right hon. Gentleman the Member for Hillsborough (Mr. Alexander) knows very well—and this is very important—that National Defence Contribution does not seek, generally speaking, to exact any contribution from interest on investments. It addresses itself to trading profits, strictly so called. If the Imperial Chemical Industries, or Unilever, or any ordinary trading company, the butcher, baker or candlestick-maker, have investments, as many of them have, money which they have preserved and put away, and are receiving year after year income from those investments, the National Defence Contribution does not ask for any contribution; neither does it in the case of the Co-operative Society. That, in the case of the great co-operative societies—the great central one, for example—is very important. Take another example. In the course of trade many enterprises have to borrow by debentures or otherwise, and they have to find somehow or other out of their gross profits the interest to be paid on the loan. That is true, I suppose, of many private companies, and, no doubt, of co-operative societies. National Defence Contribution does not take any account at all of that portion of income needed for the purpose of paying interest on loans. The co-operative society is entitled to deduct that before the contribution begins to be paid. That, again, is exactly analagous to what is done in the case of the ordinary trader.
I have not approached this matter with any sort of prejudice against the co-operative movement, but rather the opposite, for I have a great admiration for the services rendered by the co-operative society, which is an absolutely essential institution in many parts of the country, but I really cannot bring myself to believe that there is any good case to be made for exempting co-operative societies from a contribution to the National Defence Contribution. The hon. Gentleman made a reference, which was

quite natural, though it is a little difficult for me to deal with it under the rules of Order, in which he proceeded to travel further afield and pointed to certain other people whom he thought got better terms. I will take one instance to which he referred. He said—and this was also mentioned last year—that the public utility companies have been given an exemption from National Defence Contribution, and he urged that in one sense the great movement for which he was speaking is also rendering a public service, which I am not disposed to deny. He challenged me to give a definition of public utility companies. Last year I remember very well that the right hon. Gentleman the Member for Hillsborough called attention to the fact that there were some instances within the public utility definition of enterprises which, though they wire serving, no doubt, a definite public purpose, none the less made a pretty tidy profit. He was quite right. I had those instances looked at, and I exercised my wits as well as I could to see what I could do, and I hope that when we have the opportunity of legislation, such as an Electricity Bill, or whatever it may be, we shall put upon them much stricter restrictions in cases where they are too lax.
But I cannot proceed on any other principle than that, in enacting this national contribution principle, we voluntarily decided to exempt companies where they are statutory undertakings consisting, wholly or mainly in the United Kingdom or the Dominions, of certain services, such as the supply of water, gas, electricity, and so forth. I do not think that it would be possible for the House of Commons to take out individual cases and say, "It. is true you are within the definition, but I will tax you." You must proceed on some definition, and the definition here is the best we can make, though I confess that some of them are escaping when you might reasonably expect them to come in; that is because definitions sometimes break down on being interpreted. But the principle of the thing is as plain as possible. The principle is that where you have a public service company rendering public services in supplying water, gas, or electricity, where there are provisions which limit profits or charges, you are dealign with a special case rather different from the trader who is enter-


prising and endeavouring to carry on his business as successfully as he can.
I hope that I have made a full and fair statement, and I would urge the Committee to consider whether we can now adopt a Clause which would exclude co-operative societies from National Defence Contribution. I submit that that would not be a reasonable thing to do. The patriotism of these people nobody questions. It is perfectly true that the Co-operative movement is rendering very useful service in all parts of the country, but I think that the contribution they have been asked to make is a fair one, and I cannot but believe that on the broadest public grounds their members would be willing to make the contribution, and that Parliament should ask them to make it.

8.1 p.m.

Mr. Alexander: I have listened with great care to the Chancellor of the Exchequer's answer to the case for the new Clause which was made by my hon. Friend the Member for East Ham, South (Mr. Barnes). The right hon. Gentleman has completely failed to meet the main points in my hon. Friend's speech. In the first place, let us deal with the question of the legal opinion about which so much has been said to the Chancellor of the Exchequer in his presence and in his absence during the last five or six years. That legal opinion was given by the Chancellor of the Exchequer on the principle of mutuality in regard to Income Tax law in 1920. It was given not merely in regard to Income Tax law as it existed prior to the Finance Act of 1920, but also in relation to the Act of 1920 when, for the first time, by the imposition of the Corporation Profits Tax the principle of the exemption of mutual surpluses was encroached upon.
The outstanding thing about that opinion was that the Chancellor of the Exchequer, with his usual facility in the use of words and ideas, went out of his way to argue not merely the legal basis of his judgment, but he stated that there was no rational ground in the actual process of mutual association for producing a profit as a profit. It is peculiarly interesting to me, in view of that statement, that in the opinion that he has enunciated to-night he advances as an argument of what is a profit something which is entirely new. Instead of its

being related as it has always been in the past, to what is a profit on capital, he now relates it to an entirely new principle, and that is, what is to be regarded as profit for taxation purposes in the case of a co-operative society. Our real complaint about the Act of 1933 was that it changed not only what was the existing law, as described in the well known case which went to the Courts, but the law in actual practice.
I come much nearer to the Chancellor of the Exchequer's real intellectual view of the situation when I follow more closely his record in dealign with this matter in the House of Commons. I cannot find in relation to his votes on the mutual principle anything on which he could be indicted as being different in intellectual outlook to myself, until he became Chancellor of the Exchequer. Take the vote in 1933. The Chancellor of the Exchequer may say that in 1933 he was so busy that he could not spare time to come and vote, but I regard it as highly significant that in the crucial Division in 1933 he did not bother to vote. Therefore, if he is entitled to claim absence, I am entitled to claim that the expression of his intellectual judgment of years before would not allow him, conscientiously, to come and assist his Government to put this penal imposition upon millions of working-class members of co-operative societies in this country. However, that decision was made, and we find him, in a position of national emergency, putting an increasing imposition upon us, and having to get up in the House of Commons and cast overboard his surplus cargo—the great judgment that he gave to our movement in 1920.
Because of the excellent arguments put forward by my hon. Friend, I shall not take up too much of the time of the Committee, but there are a few other things that I must say in reply to the Chancellor of the Exchequer. He referred to the growth and the position now achieved by the co-operative movement and to the fact that in the very serious national provision which has to be made to meet what may be an impending danger, the co-operative movement is to be found side by side with great concerns, like Rank's and Spiller's, willing and able to serve the country. What has that to do with the question we are discussing to-night? It certainly disposes entirely of the contention of the hon. Member for the Moseley Division of Birmingham (Sir P. Hannon), who


seemed to indicate that we were wishing to escape our real responsibilities to the State. That is not so. The Chancellor of the Exchequer knows that when it is a question of helping in any national emergency the movement I represent is always willing to help.

Sir J. Simon: I am afraid that I want a money contribution also.

Mr. Alexander: Let us look at the effect of the money contribution. In the case of the savings which are affected by the operation of mutuality, again and again the Chancellor of the Exchequer is bound to admit, if he will only examine the evidence that I gave before the Committee in 1932–33, that the ultimate effect of the operation of the mutual principle is to release from the worst forms of poverty tens of thousands of people who would otherwise be a partial charge upon the Exchequer, and certainly a charge upon the local rates. Thereby we are always making a substantial contribution to the revenue of the State. In the second place, there are large numbers of our shareholders and members who, by their mutuality, create the first little parcel of actual saving which they can put away, which brings them as individuals much more rapidly into the contributory field of taxation revenue than would otherwise be the case but for the exercise of the mutual principle.
Because we put forward an argument for the exemption of mutuality, it is beside the mark for the hon. Member for the Moseley Division to suggest that we are not patriotic and not making our proper contribution to the State. The real fact is that the whole theory of Income Tax is that it is an individual tax. It is not a tax upon corporate funds. It is true, as the Chancellor of the Exchequer said, that if you make £100,000 profit in a public company and you distribute only £60,000 in interest upon the shares, you pay tax upon the sum put to reserve, but over and over again that is recovered. Again and again these companies escape the total charge of Income Tax, and when it comes to the distribution of the huge cash reserves they very nicely escape large amounts of Surtax which they would have to pay to the State.
The Chancellor of the Exchequer has not been sufficiently comprehensive in his answer, and I am sure that on the moral ground as well as the technical and legal ground he will need to look into the

matter again. Take his case about the Act of 1933 as applied to co-operative societies and its treatment of share interest. Do not let us argue as to what the Act does or does not do. Let us see how the Chancellor of the Exchequer acts. He says that the share and loan interest of industrial and provident societies shall be deducted after you have assessed the whole of the aggregate income of the society for tax. His case was that a large number of shareholders would be so poor that they would not be liable to Income Tax, and therefore it would not only be better for them but cheaper for the revenue to allow that to be deducted in that way. If that was a proper assessment, in justice, in relation to the individual shareholders of co-operative societies in 1933, why is it not an assessment, in justice, to individual shareholders of co-operative societies in regard to National Defence?
It is no answer to say to us that in the case of Income Tax the small shareholder of a company also is put in this position. The point is that in respect of the Income Tax treatment of co-operative shareholders under the Act of 1933 the Exchequer make this special provision. I know that the Chancellor of the Exchequer argues that the net result is about the same in his treatment of a company arid in his treatment of an industrial and provident society for Income Tax. That is not wholly the case. It is true that we are allowed an Income Tax deduction in respect of share interest, but we are not treated like a building society, because every one of our shareholders who is liable to Income Tax has to pay separately on the share interest he receives. In the case of a company the shareholders do not pay twice.

Sir J. Simon: There is a little difference of machinery, but I do not think it is more than that. Take a limited company. When I have distributed to me my share of the interest due to me, I get it less tax. Then I am left to get the tax back if I am able to prove that I come within the proper limits of exemption. In that case I do not have to bear the tax, but if I am within the taxable limit then I have to bear it. Exactly the same result is reached in connection with the cooperative society but by the reverse process. You begin by giving each shareholder his share interest without having deducted any tax. Suppose there is a


shareholder who comes within the Income Tax limits, then, as the right hon. Gentleman correctly says, there has to be a separate assessment on him for Income Tax. Therefore, we arrive at the same result in the end. In the first case you start by deducting the tax and getting it back again if you are not within the Income Tax limit, and in the second case you give the interest gross and you assess the recipient separately if necessary.

Mr. Alexander: We understand the machinery just as well as the right hon. Gentleman. The Chancellor of the Exchequer was very anxious to say that my hon. Friend the Member for East Ham, South put up a good argument from his point of view. The Chancellor of the Exchequer has put up a good argument from his own point of view. But what happens is this: that the Government use this special type of machinery in respect of co-operative societies in order to save money in collection, they do it deliberately, and leave co-operative societies to pay the tax upon the whole of the balance although the individual shareholder in the society has to pay direct. If the Government wanted us to be assessed for Income Tax under the 1933 Act—we do not concede the principle at all—then in fairness they ought to allow us to deduct the tax—because we are taxed on reserves—from everyone of our shareholders however small the amount may be. But not for the sake of justice, but mainly for the convenience and economy of the Treasury, they adopt the other method. If the Government decide that this is just treatment, we claim that we should not be worse off in respect of the machinery for National Defence Contribution than we are in respect of Income Tax. That is my general answer to the case put by the Chancellor of the Exchequer in reply to my hon. Friend the Member for East Ham, South.
I am very concerned indeed that the Chancellor has ridden off in the way he has on the points put by my hon. Friend with regard to public utility societies and building societies. In the first place, the Chancellor of the Exchequer did not make any real answer to the case put in regard to building societies. We have made it plain that we are not critical of the wisdom of the action of the Chancellor of the Exchequer in giving special

treatment to building societies, but it must be observed that the average depositor and holder of shares in a building society is a much wealthier person than the average member of a co-operative society, and that in a number of cases the revenue is robbed by wealthy families having three and four, and seven or 10 or a dozen holdings in a building society in order that their total income may pay at only half the Income Tax rate. It is only in that way that you keep up the average of the shareholding figures in building societies. But the Government have deliberately gone out of their way to scale down the National Defence Contribution in respect of building societies. Why? Not for the sake of the poor people who are shareholders, but in order that one of the alternatives mentioned by my hon. Friend shall not be taxed, and that is the reduction of the rate of share interest to these wealthy depositors in building societies. You give no such treatment to the 8,000,000 shareholders in industrial and provident societies, with only an average holding of f £18.
In the second place the Chancellor of the Exchequer has ridden off on the case put in regard to public utility societies. What case is there at all for the exemption of public utility societies? If they are making the ordinary provision of the necessities of life for poor people day after day, electricity, water, transport, what is there of greater virtue about that than when co-operative societies provide tea and sugar and bacon and bread and milk? These are matters of daily necessities as much as other things. The only thing is that this great country in which we live has not gone as far forward in recognising the need for collective provision for these other commodities as they have in the case of electricity, water and transport. Yet you see behind the financial provisions of these public utility societies a very sound investment for the ordinary profit-making investor, and you exempt them from this extra imposition. Why? I am certain that we have not had the vestige of an answer, and if there is an answer I think we should have it before this Debate finishes.
I apologise to my hon. Friends for having intervened perhaps too early, but I wanted to answer the Chancellor of the Exchequer while the points were in my mind. I feel myself far more convinced


and much more determined in the rightness of our case as the result of the Debate, as far as this has gone, than I did last year, and I hope that my hon. Friends and fellow members throughout the country will stick to this job until we defeat this injustice.

8.22 p.m.

Sir J. Mellor: I feel that there is every reason why co-operative societies should pay their full share of taxation in general and of the National Defence Contribution in particular. One reason is that it is a great sheltered industry. It is sheltered in the sense that it is a distributing trade in the main part, and, therefore, sheltered from the difficulties which attend export businesses, and also is not so much subject to the fluctuation of prices which hits so hard and so often the primary producer.

Mr. James Griffiths: Will the hon. Member develop that argument and show in what way co-operative societies are sheltered, and also whether public utility societies are not sheltered?

Sir J. Mellor: That does not alter my argument in the least. Everyone recognises as a fact that primary producers are much more liable to be hit by fluctuations in prices than the distributive trades. Also, this is a very large concern. We have been told by the hon. Member for East Ham South (Mr. Barnes), who moved the Amendment, that the share capital of the co-operative societies amounts to £150,000,000. I do not know how much one ought to add to that in respect of loan capital in order to arrive at the amount of capital which is employed in the co-operative society movement generally. There is also this point, that as compared with other businesses, as compared with private enterprises, cooperative societies pay a very small amount of tax in proportion to their turnover and, therefore, I feel it is right that they should bear the taxation which is at present imposed upon them.

Mr. Alexander: Can the hon. Member give me a single instance in which taxation either for revenue purposes or for National Defence Contribution has ever been based upon turnover?

Sir J. Mellor: I do not suggest that it has been based upon turnover. I am pointing out that as the "divi" is

treated, and properly treated, as a trade discount, the amount of profits in relation to the turnover which are subject to taxation in the case of co-operative societies, is very small indeed as compared with the position of private companies. My next point is that the Chancellor of the Exchequer not only needs to collect a fair proportion of taxation from the co-operative societies, but also to protect the Revenue. If the co-operative societies were put in a relatively privileged position, they would have an unfair advantage over competitive private enterprise, and one would expect the ultimate result to be that private enterprise would tend to be driven out of business. Hon. Members on my side of the Committee believe in the maintenance of private enterprise, but at the same time we recognise that cooperative societies are performing a very valuable function in this country. We recognise that they should have equality, but we do not see why they should have more than equality.
Therefore, I say that the Chancellor of the Exchequer is perfectly right in requiring them to pay their full share of taxation in order to protect the Revenue, because if we allowed a privileged form of enterprise to drive out of business a form of enterprise which was much more heavily taxed, then the Chancellor would naturally lose revenue to an increasing extent every year. I do not think that hon. Members should press academic theory too far in their arguments on behalf of co-operative societies. In the Finance Bill we are passing retrospective legislation, which is contrary to all academic theory, in order, in some cases, to prevent evasion, where it is unquestionably right, but also, as was discussed yesterday, in certain other cases where it is much more doubtful. I think hon. Members ought to look at the realities of the position. I am certain that if a co-operative method had been used by, say, a certain number of rich men for the purpose of the evasion of taxation, hon. Members of the Opposition would have been the very first to say that we must not adhere too strictly to an academic theory of legislation, but must immediately set to work to put a stop to it.

Mr. Alexander: I would point out to the hon. Baronet that my hon. Friend the Member for South East Ham (Mr. Barnes) introduced a Bill in 1929 which


was aimed at preventing the co-operative principle being exploited by such misleading of the public.

Sir J. Mellor: I see no objection to that. I feel that the theory of mutuality ought not to be pushed too far. I have already pointed out that co-operative societies have a very great advantage in their "divi" being treated as a trade discount, because it absorbs the great bulk of their profits before they become assessable to taxation. Therefore, I consider that the co-operative societies ought to be content to be on fair competitive terms with private enterprise. If they are content with that position, I am sure they will enjoy the good will of the country and of private enterprise itself.

8.29 p.m.

Mr. Ridley: I am grateful to the hon. Baronet the Member for Tamworth (Sir J. Mellor) for having addressed the Committee, since thet enables me to intervene with less trepidation than would otherwise have been the case. Most hon. Members on this side would hesitate before rising to address the Committee after the powerful speech made by my right hon. Friend the Member for Hillsborough (Mr. Alexander). The Committee has heard a very remarkable speech from the Chancellor of the Exchequer, not, as I hope to show, the first remarkable speech which the right hon. Gentleman has made in connection with this proposition. The Chancellor said that if we accepted the decision that was taken in 1933, we could not to-night accept the new Clause now under discussion. I am a tyro in these matters, but I thought that if there was one person in the Committee who did not accept the decision of 1933, it was the Chancellor. If I understand the position rightly, the 1933 decision extended the area to which Income Tax was applied. If the Chancellor's case to-night were that the National Defence Contribution was being applied to the whole of the area covered by Income Tax under the 1933 decision, he would have a stronger case than he has so far presented; but so far from accepting—

Sir J. Simon: I interrupt the hon. Gentleman because I am sure that he is putting a difficulty which he really feels, and I will try to remove it. If he will look at the provisions of the Finance Act of

last year concerning the National Defence Contribution, he will see this:
For the purpose of the National Defence Contribution, the profits arising from a trade or business… shall be so computed on Income Tax principles.
That is the principle of 1933.

Mr. Ridley: Surely, the 1933 decision added to the area to which Income Tax was applied, and if the National Defence Contribution was being applied to the whole of that area as added to by the 1933 decision, the right hon. Gentleman would have had a more justifiable case to submit to the Committee than he has now. But so far from accepting that decision, he goes out of his way to provide a very considerable number of exceptions to it. If the 1933 decision, considered in the light of the circumstances of the Finance Act of last year and the Clause before the Committee to-night, is seen to be an unfair decision, surely the Committee is not to be guilty of that sort of consistency which Emerson described as the hobgoblin of little minds.
My hon. Friend the Member for South East Ham (Mr. Barnes) inquired as to what are public utility companies within the definition of the Finance Act of last year. I should like to ask what are professions within the definition of last year's Finance Act. I can understand a grocer complaining because an estate agent next door who is making a very considerable income is not required to bear the burden of the National Defence Contribution. I can understand his complaining because prosperous and opulent members of the profession which the right hon. Gentleman himself adorns do not have to bear the burden of patriotism known as the National Defence Contribution. I should like to know how far this exception goes in the matter of professions. Does it extend to great singers and great pugilists? To whom does the exception apply? In any case, it is applied to doctors, lawyers, public utility companies and building societies, thus destroying altogether the contention on which the Chancellor builds his case, that we are bound to stand by the 1933 decision.
As I have said, this is not the first remarkable speech which the Chancellor has made on this subject. My general feeling after the discussions that took place last year on this matter was that


the tax, applied to the co-operative movement, was an unfair tax. That general feeling has been strengthened by a further attempt to understand the problem, especially in the light of the case made by the right hon. Gentleman himself last year. I have attempted to find some justification for that case in the language which the Chancellor used last year and in the cases which he cited, but I am sorry that I cannot find any. The more I examine the problem, the more its unfairness becomes obvious even to the point of being monstrous. Stripped of all complexities, the simple issue is, what should be regarded as profit for the purposes of this form of taxation? The Chancellor has made a comparison, which my right hon. Friend has shown not to be justifiable, in seeking to link two great limited liability companies with the Co-operative Wholesale Society. The Chancellor made a similar, and as I think, a non-relevant comparison last year. Speaking in Committee on 15th July the Chancellor in imagination strolled down a village street in which were situated the general businesses of Messrs. X and Company, of Messrs. Y X in partnership, and the Cooperative Society. He suggested, with some show of moral indignation, that to apply the tax to Messrs. X and Company and to Messrs. Y X in partnership but not to the Co-operative Society would be very unfair.
I often find it difficult to believe that the Chancellor persuades himself by the employment of his own arguments. If he does he must in that instance have been in his most persuasive mood to persuade himself that there was any taxable similarity between those three undertakings. Take X and Company. It is a public company. Its shares are on the Stock Exchange. They are bought by all sorts of people—by people who have no knowledge of grocery or of drapery, who are pure investors and who make a profit merely by lending or investing money. Most likely they spend none of their money with the firm in which their investments are made, either because they despise the goods which the firm sells, or because the firm has not a branch in Nice or Cannes. That is sheer profit, which is properly taxable. The investment too has propably been induced, if the Chancellor and I have the same firm in mind, by a remarkable financial experience in

which, by selling inferior goods at superior prices and employing workpeople under unsatisfactory conditions, large profits have been made, high dividends paid and bonus shares distributed.
None of these things is characteristic of the co-operative society, and therefore no comparison in that case can be sustained. I wander a little further with the right hon. Gentleman down the village street and examine the partnership of Mr. Y and Mr. X. It is very improbable that they will make a profit large enough to rank for tax, especially if they have managed to employ themselves with each other as joint managers at salaries in the fixing of which care is taken to avoid tax. Or, they may be absentee partners, far away in Arcady, not soiling their fingers with currants or calico. Again, there is no similarity between such a partnership and the ordinary co-operative society. The co-operative society is in the main a working-class community very frequently a community of low wage-earners or perhaps a community many of whom are not wage-earners at all. Many of them may be unemployed in mining areas or in the areas covered by the cotton industry of Lancashire. Some two or three thousand of these people band themselves together in a co-operative society. What for? Is it for Stock Exchange speculation like X and Company? Not at all. It is in order to make their meagre incomes provide a little more cover for life's necessities than would be possible either with X and Company or the Y and X partnership.
This, I venture to suggest, is the best kind of thrift and is to be encouraged and not to be exploited. But there are dividends, a word which in this connection I feel tends to confusion. Those dividends do not arise from investments but from purchases. They are distributed, but they are spent and re-spent in hundreds of cases long before that. They are spent over and over again, so to speak, in a grim kind of speculation—speculation as to how far they will go and how much they will provide. Will the dividend provide a pair of boots for young John? Will it make a dress for mother? Will it buy a new carpet or a new rug? Will it replace worn-out sheets or unusable saucepans? Will it provide a ton of coal for the winter? How far will the dividend provide cover for all those grim necessities? It is a safe


assumption and a very important assumption too, in my view, that almost every halfpenny of the co-operative dividend is immediately spent again with the cooperative society.
It is that kind of cash purchasing power which is the basis of all good trade and which I submit we limit at our peril. But the Chancellor seeks to limit it, and here again, as in the case of the Tea Duty, he goes to the poorest of our community and pinches the barest necessities of our people. If the Chancellor urges that for the individual the tax cannot amount to more than a shilling or two, I reply that a shilling or two in households like these means much more than the most comfortable people in this Committee are able to realise. Further, the wickedness of the incidence is not only in its size but in its character. Some things are meaner by their smallness than by their enormity, and here again, as in the case of the Tea Duty, I say the Chancellor has stooped very low indeed to pick up so little from the individual. I conclude by expressing the view that the repercussions of this matter have been making themselves felt in the constituency which the right hon. Gentleman once frequented before he was sent as a wanderer on the face of the political earth in search of a safe Tory seat.

8.42 p.m.

Mr. Gallacher: The extraordinarily well-reasoned speech of the hon. Member for East Ham, South (Mr. Barnes), backed by the powerful arguments of the right hon. Gentleman the Member for Hillsborough (Mr. A. V. Alexander), has presented a case which the Chancellor of the Exchequer cannot possibly answer. He has made no attempt to answer it. I was interested, however, in the speech of the hon. Member for Moseley (Sir P. Hannon), who said that co-operators should contribute in the same way as any other citizens, and added that it was something like impertinence on the part of hon. Members on this side to put forward such a proposition as this new Clause. One can only answer by saying that only ignorance of the subject can excuse the hon. Member for accusing hon. Members on this side of impertinence. He says the co-operators should pay their contributions the same as other citizens. All right, but I challenge the Chancellor of the Exchequer with the fact that he is

demanding that the co-operators should pay more than other citizens. No member of this Committee has any right to allow his prejudices to decide his conduct on this question of justice to the co-operative movement. We had an example this afternoon of what prejudice can do. We were supposed to be discussing a Bill to deal with the protection of religion in this country against foreign freethinkers, but the hon. and gallant Member in charge of the Bill got up and talked about Bolshevism—

The Deputy-Chairman: I think we had better keep to the Clause which is before the Committee.

Mr. Gallacher: I was only giving an example of how prejudice works and I do not want to see prejudice against the co-operative movement influencing the voting of Members on this question. An hon. Member behind me spoke against this new Clause, and it was obvious that his concern for private trade and capitalism, which is to be continually shored up by the Government, weighed his mind against the possibility of justice to cooperators. When the National Defence Contribution was introduced by the Prime Minister when he was Chancellor of the Exchequer, he informed us that the idea of it was to ensure that the extra profits that were being made through armaments would contribute towards the armaments expenditure. The Chancellor cannot deny that that was the idea behind it.
When the National Defence Contribution was introduced nobody dreamed that there was to be any attempt to make it a general tax applying to the mass of the people. Nobody has any such idea now, but it has become a general tax, not applying to the people as a whole, but applying to a section of the people, namely, co-operators. When the Prime Minister made his speech introducing the tax no one dreamt that the day would arrive when old age pensioners and poor workers would have to pay a share of it. That is the position we have now reached with this tax on the Co-operative movement. It is not old age pensioners and poor workers as a whole who have to pay, but only old age pensioners and poor workers who are co-operators. The Chancellor took the instance of a street in which there was a business run by X at one end and a business run by Y at the other, with a co-operative store in


between. The Chancellor said that it was an extraordinary thing to suggest that X and Y should pay the tax and that the co-operative store should not. I drew attention to the absurdity of his argument on the last occasion, and it is necessary to mention it again in order to emphasise the point I am making that this tax, which was supposed to be of a particular character, has now become of a general character applying to a section of the community.
The Chancellor of the Exchequer did not face this consideration of his own argument. The Chancellor these days seems to be better at dodging arguments than facing them. X makes a profit of £1,750 and Y at the other end of the street makes a similar profit. Between them they make a profit of £3,500. I ask the Chancellor how much they pay of this tax. They pay nothing. In between there is a co-operative store which makes £3,000 profit. It pays something. In this co-operative society there may be r1,000 members who have put in their shillings, and pounds if they can spare them, and have gradually built up a little business. These members have between them, out of their trading and selling among themselves, made £3,000. They are to pay tax. The two private traders with L£3,500 profit between them will pay nothing. Is there any justice in that? Take any tenant in Glasgow or any house where there are four families, poor working-class families having a hard and desparate struggle to live. Two of the families are represented by fathers and mothers who are old age pensioners. They trade in the co-operative society, having joined with others to build up a system of mutual co-operation in order to enable them to live. According to this tax which the Chancellor has imposed on the co-operative society, the poor old age pensioners who are members of the society have to contribute to the National Defence Contribution while the other two families do not have to contribute.
Is it possible to justify taxation of that kind? Is it possible for any Member to get up and have the audacity to say that co-operative societies should pay a share? Every co-operative society in the country is involved in general taxation. All co-operators, like anybody else, pay

the Tea Duty, but here is a tax which no Member of the Government can justify. The Chancellor says that he has a good deal of sympathy with the co-operative movement, but he imposes this penal tax on it. I would rather do without his sympathy if it would get rid of the tax. Let him take away the tax and we will give him back his sympathy He says that there is nothing here specially against the co-operative movement and that we will not find it mentioned in the Finance Bill. That is the trouble. We want to see it mentioned. The Chancellor can mention utility companies.
One hon. Member argued that the cooperative movement is a sheltered industry with no competition from abroad. What about electricity companies, water companies and transport companies? Are they not sheltered? Of course they are, and making loads of profit out of other people. When does the Chancellor ever make any attempt to face the arguments of the hon. Member for East Ham, South? We find utility companies mentioned—not the co-operative societies. We find building societies mentioned—not the cooperative societies. I would appeal to hon. Members opposite. I know that it is very difficult to subdue prejudice—I have seen so much of it in all directions —but here is a case which has been argued well and powerfully by the representatives of the co-operative movement in this Committee, and the Chancellor of the Exchequer has not met, and has not attempted to meet, the case.

Mr. Kirkwood: He cannot meet it.

Mr. Ga!llecher: No, he cannot meet it in his own constituency, and that is why he has become known in this House as the outstanding political refugee in this country. I challenge any opponents of this Clause—and I know that I am safe in making the challenge, because no one on the whole of the Front Bench opposite will take it up—to face either the right hon. Member for Hillsborough or the hon. Member for East Ham on any public platform and try to justify their attitude. Therefore, not in the name of the cooperative movement, although I have been a member of it all my life, but in the name of justice I ask the Committee to put an end to this attempt to penalise the co-operative movement.

Question put, "That the Clause be read a Second time

The committee divided: Ayes, 149; Noes, 210.

Division No. 254.]
AYES.
[8.58 p.m.


Acland, R. T. D. (Barnstaple)
Hall, G. H. (Aberdare)
Parkinson, J. A.


Adams, D. (Consult)
Hall, J. H. (Whitechapel)
Pearson, A.


Adams, D. M. (Poplar, S.)
Hardie, Agnes
Pethick-Lawrence, Rt. Hon. F. W.


Alexander, Rt. Hon. A. V. (H'Isbr.)
Harris, Sir P. A.
Poole, C. C.


Anderson, F. (Whilehaven)
Harvey, T. E. (Eng. Univ's.)
Price, M. P.


Aske, Sir R. W.
Hayday, A.
Pritt, D. N.


Attlee, Rt. Hon. C. R.
Henderson, A. (Kingswinford)
Quibell, D. J. K.


Bonfield, J. W.
Henderson, J. (Ardwick)
Richards, R. (Wrexham)


Barnes, A. J.
Henderson, T. (Tradeston)
Ridley, G.


Batey, J.
Hills, A. (Pontefract)
Riley, B.


Ballenger, F. J.
Holdsworth, H.
Ritson, J.


Bann, Rt. Hon. W.
Hopkin, D.
Roberts, Rt. Hon. F. O. (W. Brom.)


Benson, G.
Jenkins, A. (Pontypool)
Roberts, W. (Cumberland, N.)


Broad, F. A.
Jenkins, Sir W. (Neath)
Robinson, W. A. (St. Helens)


Bromfield, W.
John, W.
Salter, Dr. A. (Bermondsey)


Brown, C. (Mansfield)
Johnston, Rt. Hon. T.
Seely, Sir H. M.


Buchanan, G.
Jones, A. C. (Shipley)
Sexton, T. M.


Burke, W. A.
Jones, Morgan (Caerphilly)
Sitkin, L.


Charleton, H. C.
Kelly, W. T.
Silverman, S. S.


Chater, D.
Kennedy, Rt. Hon. T.
Simpson, F. B.


Cluse, W. S.
Kirby, B. V.
Sinclair, Rt. Hon. Sir A. (C'thn's)


Clynes, Rt. Hon. J. R.
Kirkwood, D.
Smith, Ben (Rotherhithe)


Cooks, F. S.
Lansbury, Rt. Hon. G.
Smith, E. (Stoke)


Collindridge, F.
Lathan, G.
Smith, Rt. Hon. H. B. Lees- (K'Iy)


Cove, W. G.
Lawson, J. J.
Smith, T. (Normanton)


Daggar, G.
Leach, W.
Sorensen, R. W.


Dalton, H.
Leonard, W.
Stewart, W. J. (H'ght'n-le-Sp'ng)


Davidson, J. J. (Maryhill)
Leslie, J. R.
Summerskill, Dr. Edith


Davies, R. J. (Westhoughton)
Logan, D. G.
Taylor, R. J. (Morpeth)


Davies, S. O. (Merthyr)
Lunn, W.
Thurtle, E.


Day, H.
Macdonald, G. (Ince)
Tinker, J. J.


Bobbie, W.
McEntee, V. La T.
Tomlinson, G.


Dunn, E. (Rother Valley)
McGhee, H. G.
Viant, S. P.


Ede, J. C.
McGovern, J.
Walkden, A. G.


Edge, Sir W.
MacLaren, A.
Watkins, F. C.


Edwards, Sir C. (Bedwellty)
Maclay, Hon. J. P.
Watson, W. McL.


Fletcher, Lt.-Comdr. R. T. H.
Maclean, N.
Welsh, J. C.


Gallacher, W.
Marklew, E.
Westwood, J.


Gardner, B. W.
Marshall, F.
White, H. Graham


Garro Jones, G. M.
Mashers, G.
Whiteley, W. (Blaydon)


George, Major G. Lloyd (Pembroke)
Maxton, J.
Wilkinson, Ellen


George, Megan Lloyd (Anglesey)
Milner, Major J.
Williams, D. (Swansea, E.)


Gibson, R. (Greenock)
Montague, F.
Williams, E. J. (Ogmore)


Graham, D. M. (Hamilton)
Morrison, Rt. Hon. H. (Hackney, S.)
Williams, T. (Don Valley)


Green, W. H. (Deptford)
Morrison, R. C. (Tottenham, N.)
Windsor, W. (Hull, C.)


Greenwood, RI. Hon. A.
Muff, G.
Woods, G. S. (Finsbury)


Grenfell, D. R.
Nathan, Colonel H. L.
Young, Sir R. (Newton)


Griffith, F. Kingsley (M'ddi'sbro, W.)
Naylor, T. E.



Griffiths, G. A. (Hemsworth)
Owen, Major G.
TELLERS FOR THE AYES.—


Griffiths, J. (Lianelly)
Palign, W.
Mr. Groves and Mr. Adamson.


Guest, Dr. L. H. (Islington, N.)
Parker, J.





NOES


Acland-Troyte, Lt.-Col. G. J.
Browne, A. C. (Belfast, W.)
Davies, C. (Montgomery)


Adams, S. V. T. (Leeds, W.)
Bull, B. B.
De la Bère, R.


Agnew, Lieut.-Comdr. P. G.
Butcher, H. W.
Denman, Hon. R. D.


Albery, Sir Irving
Campbell, Sir E. T.
Denville, Alfred


Allen, Col. J. Sandeman (B'knhead)
Cayzer, Sir H. F. (Portsmouth, S.)
Doland, G. F.


Allen, Lt.-Col. Sir W. J. (Armagh)
Christie, J. A.
Donner, P. W.


Assheton, R.
Clarke, Colonel R. S. (E. Grinstead)
Dorman-Smith, Major Sir R. H.


Astor, Major Hon. J. J. (Dover)
Clarry, Sir Reginald
Drewe, C.


Astor, Hon. W. W. (Fulham, E.)
Cobb, Captain E. C. (Preston)
Duckworth, W. R. (Moss Side)


Baillie, Sir A. W. M.
Colfox, Major W. P.
Dugdale, Captain T. L.


Baldwin-Webb, Cal. J.
Colman, N. C. D.
Duggan, H. J.


Barclay-Harvey, Sir C. M.
Conant, Captain R. J. E.
Dunglass, Lord


Beamish, Rear-Admiral T. P. H.
Cook, Sir T. R. A. M. (Norfolk, N.)
Eckersley, P. T.


Beauchamp, Sir B. C.
Cooke, J. D. (Hammersmith, S.)
Edmondson, Major Sir J.


Beaumont, Hon. R. E. B. (Portsm'h)
Cooper, Rt. He. T. M. (E'nburgh, W.)
Ellis, Sir G.


Beechman, N. A.
Cranborne, Viscount
Elliston, Capt. G. S.


Bennett, Sir E. N.
Croft, Brig.-Gen. Sir H. Page
Emrys-Evans, P. V.


Bernays, R. H.
Crooke, Sir J. Smed'e
Errington, E.


Bossom, A. C.
Crookshank, Capt. H. F. C.
Evans, Capt. A. (Cardiff, S.)


Bower, Comdr. R. T.
Croom-Johnson, R. P.
Everard, W. L.


Boyce, H. Leslie
Cross, R. H.
Fildes, Sir H.


Braithwaite, Major A. N.
Crowder, J. F. E.
Fremantle, Sir F. E.


Brass, Sir W.
Culverwell, C. T.
Fyfe, D. P, M.


Briscoe, Capt. R. G.
Davidson, Viscountess
Grant-Ferris, R.




Greene, W. P. C. (Worcester)
MacDonald, Rt. Hon. M. (Ross)
Salt. E. W.


Gretton, Col. Rt. Hon. J.
Macdonald, Capt. P. (Isle of Wight)
Samuel, M. R. A.


Gridley, Sir A. B.
Maitland, A.
Sanderson, Sir F. B.


Grimston, R. V.
Makins, Brigadier-General Sir Ernest
Scott, Lord William


Gritten, W. G. Howard
Manningham-Buller, Sir M.
Selley, H. R.


Hambro, A. V.
Margesson, Capt. Rt. Hon. H. D. R.
Shaw, Major P. S. (Wavertree)


Hannah, I. C.
Markham, S. F.
Shaw, Captain W. T. (Forfar)


Harbord, A.
Maxwell, Hon. S. A.
Shepperson, Sir E. W.


Harvey, Sir G.
Mayhew, Lt.-Col. J.
Simon, Rt. Hon. Sir J. A.


Haslam, Henry (Horncastle)
Mellor, Sir J. S. P. (Tamworth)
Sinclair, Col. T. (Queen's U. B'lf'st)


Heilgers, Captain F. F. A.
Mills, Sir F. (Leyton, E.)
Smiles, Lieut.-Colonel Sir W. D.


Hely-Hutchinson, M. R.
Mills, Major J. D. (New Forest)
Smith, Braoewell (Dulwich)


Hepworth, J.
Moreing, A. C.
Smith, Sir R. W. (Aberdeen)


Herbert, A. P. (Oxford U.)
Morris-Jones, Sir Henry
Smithers, Sir W.


Herbert, Major J. A. (Monmouth)
Morrison, G. A. (Scottish Univ's.)
Somervell, Rt. Hon. Sir Donald


Herbert, Capt. Sir S. (Abbey)
Muirhead, Lt.-Col. A. J.
Somerville, A. A. (Windsor)


Higgs, W. F.
Munro, P.
Southby, Commander Sir A. R. J.


Hope, Captain Hon. A. O. J.
Nall, Sir J.
Stanley, Rt. Hon. Lord (Fylde)


Hopkinson, A.
Neven-Spenee, Major B. H. H.
Stanley, Rt Hon. Oliver (W'm'l'd)


Horsbrugh, Florence
Nicotson, Hon. H. G.
Strauss, E. A. (Southwark, N.)


Hudson, Capt. A. U. M. (Hack., N.)
O'Connor, Sir Terence J.
Strauss, H. G. (Norwich)


Hume, Sir G. H.
Peaks, O.
Stuart, Lord C. Crichton- (N'thw'h)


Hunloke, H. P.
Peat, C. U.
Stuart, Hon. J. (Moray and Nairn)


Hunter, T.
Perkins, W. R. D.
Sueter, Rear-Admiral Sir M. F.


Hurd, Sir P. A.
Petherick, M.
Tasker, Sir R. I.


Hutchinson, G. C.
Pickthorn, K. W. M.
Taylor, C. S. (Eastbourne)


Jones, Sir H. Haydn (Merioneth)
Pilkington, R.
Taylor, Vice-Adm. E. A. (Padd., S.)


Jones, L. (Swansea W.)
Ponsonby, Col. C. E.
Thomson, Sir J. D. W.


Keeling, E. H.
Radford, E. A.
Thorneycroft, G. E. P.


Kerr, Colonel C. I. (Montrose)
Wakes, H. V. A. M.
Titchfield, Marquess of


Keyes, Admiral of the Fleet Sir R.
Ramsbotham, H.
Touche, G. C.


Lamb, Sir J. Q.
Ramsden, Sir E.
Tufnell, Lieut.-Commander R. L.


Latham, Sir P.
Rankin, Sir R.
Turton, R. H.


Law, Sir A. J. (High Peak)
Rathbone, J. R. (Bodmin)
Walker-Smith, Sir J.


Law, R. K. (Hull, S.W.)
Rayner, Major R. H.
Wallace, Capt. Rt. Hon. Euan


Leech, Sir J. W.
Reed, A. C. (Exeter)
Ward, Lieut.-Col. Sir A. L. (Hull)


Leighton, Major B. E. P.
Reed, Sir H. S. (Aylesbury)
Ward, Irene M. B. (Wallsend)


Levy, T.
Reid, Sir D. D. (Down)
Wardlaw-Milne, Sir J. S.


Liddell, W. S.
Rickards, G. W. (Skipton)
Waterhouse, Captain C.


Lipson, D. L.
Robinson, J. R. (Blackpool)
Wells, Sir Sydney


Little, Sir E. Graham-
Ropner, Colonel L.
Whiteley, Major J. P. (Buckingham)


Llewellin, Colonel J. J.
Ross Taylor, W. (Woodbridge)
Windsor-Clive, Lieut.-Colonel G.


Loftus, P. C.
Rowlands, G.
Wise, A. R.


Lyons, A. M.
Royds, Admiral Sir P. M. R.
Wragg, H.


Mabana, W. (Huddersfield)
Ruggles-Brise, Colonel Sir E. A.



MacAndrew, Colonel Sir C. G.
Russell, R. J. (Eddisbury)
TELLERS FOR THE NOES.—


MeCorquodale, M. S.
Russell, S. H. M. (Darwen)
Mr. Furness and Major




Harvie Watt.

NEW CLAtisUSE.-—-(Relief in respect of Income Tax assessment for Ministers of the Crown who are Members of the House of Commons.)

For the purposes of assessment of Income Tax and Surtax, the first six hundred pounds of the salary of a Minister of the Crown who is also a Member of the House of Commons, shall be deemed to be salary on account of services rendered as a Member of Parliament. —[Sir I. Albery.]

Brought up, and read the First time.

9.7 P.m.

Sir I. Albery: I beg to move, "That the Clause be read a Second time."
This is, in a way, a rather interesting Clause. During the discussion of this Bill we have considered questions of evasion of taxation, and there has been agreement on all sides of the Committee that we should do what we can to prevent people avoiding their just dues as taxpayers by quibbling or trying to get round the letter and the spirit of the law. This Clause presents another side of the picture. I

have put my name to it, not merely because I desire the Chancellor of the Exchequer and his colleagues to be dealt with fairly, but more because when the right hon. Gentleman comes to reply he will very likely say that one of his reasons for not accepting the proposed new Clause is that there are many other cases that are unjustly dealt with, and that he would like to deal with them all at the same time. My view is that nothing would give the other people more encouragement than his acceptance of this Clause. If he puts right the wrong from which he and his colleagues are suffering, we can claim that the other people who are suffering from injustices have every prospect of theirs being put right in the near future. Let me now explain in a little more detail what the injustice is.
It appears that when a Member of Parliament is promoted to be a Minister of the Crown, perhaps as a junior Minister or a junior Whip, he becomes entitled, from a salary of £600 a year, to a salary


of, say, £1,000 a year, but from that moment he no longer has the right to claim any relief on account of his expenses as a Member of Parliament. I understand that the argument under Income Tax law is that you cannot claim relief upon any remuneration which you receive on account of a different service. When that Member becomes a Minister he receives his salary as a Minister but nothing as a Member of Parliament, and he is therefore no longer entitled to claim on account of his expenses as a Member of Parliament. I do not think that that result could have been the intention of whoever framed those provisions. It seems clear that a junior Minister will have, in the main, exactly the same expenses as he had before he was made a junior Minister, and the effect under the present arrangement is that after he becomes a junior Minister he gets no increase of salary at all, in addition to which he may have to give up his employment, if he has private employment, and to devote the whole of his time in the office of the Minister. Financially, he finds himself no better off, and possibly worse off, than he was as a Member of Parliament.
The Treasury or the Income Tax officials have taken that view for some time past. I am bound to say that it is their duty to exact from the taxpayer as much taxation as the law will enable them to exact, but that does not seem very different from the position of the taxpayer who avoids as much taxation as he can as long as he remains within the law. For that reason I consider the present moment an opportune one to raise this point. The Chancellor of the Exchequer will say, of course—he has already said it—that the present is not a good moment to make any tax concession, but this is a very small concession. On the other hand, it is a good moment to raise it. The letter of the law is that when a Member of Parliament gets to ministerial rank he should be deprived of his just relief. Legally, that is entirely in order, but, in my view, it is entirely against all views of justice and equity, and is against the spirit of the law.

.9.14 p.m.

Sir J. Simon: My hon. Friend has raised an interesting point, which arouses, on the face of it, a sympathetic feeling in certain breasts. I think his account of the situation is accurate. J admit, as

one who has been a Minister of the Crown in various offices, that it bears harshly in certain cases. Income Tax law is perfectly clear. It is that the holder of any public office who is paid a salary because he holds that office is entitled, for the purposes of Income Tax, to deduct only those expenses which he incurs wholly, exclusively and necessarily in the performance of the duties of that office. That is the ordinary law which applies to every one, what-ever his office is. It follows that a Member of Parliament who receives k£600 a year is entitled to deduct from that i£600, for purposes of Income Tax, expenses that he wholly, exclusively and necessarily incurs in the performance of his duties as a Member of Parliament. As many hon. Members know, £100 is allowed as a matter of course, and, if any Member of Parliament can prove, as many can, that the expenses which are wholly, exclusively and necessarily incurred by him in the performance of his duties as a Member of Parliament amount to more than that, he can make a further deduction.
Supposing, however, that a Member of the House becomes a Minister of the Crown, he becomes the holder of an office for which he receives a salary, and it might be supposed that thereupon he. would be entitled to deduct from his salary the same expenses which he had deducted when he was a Member of Parliament. But the law answers, "Ah, but those expenses which you want to deduct are really expenses which you incur in the performance of your duties as a Member of Parliament. The expenses which you incur in discharging your duties as a Minister will be at any rate almost entirely met out of public funds as part of the expenses of the office, and, therefore, you are no longer entitled to deduct anything at all; you must suffer Income Tax on your salary as a Minister without any diminution or deduction whatever." And that is what happens.
It is not disputed, of course, that a junior Minister receiving perhaps £1,000 a year has to pay Income Tax on that £1,000 without any deduction at all, as a result of an accurate and perhaps rather refined application of the Income Tax law; but although he may incur expenses, as, for instance, for a private secretary to deal with his constituency correspondence and so on. he can no longer say that he is


incurring those expenses in the discharge of his duties when holding the office of Minister, because they are really expenses incurred as a Member of Parliament, and he has become an unpaid Member of Parliament. That is how the matter stands. It is due, first, to the fact that that is the law; and, secondly, to decisions which were reached as long ago as 1911, when the position was expressed to be that there should be a payment to each Member of Parliament of, at that time, £400 a year, excluding any Member who was for the time being in receipt of the salary of an office under the Crown. What I have said will probably cause a number of hon. Members to feel that this is rather an artificial distinction and a hard rule, and it is true that some Ministers feel that they have some ground of complaint about it. But unquestionably it is the right application of Income Tax law.
I am now asked whether I am prepared to accept this agreeable proposal to change the rule for the benefit of Ministers present and to come. I cannot do that, and I cannot do it for, among other things, this definite reason. The Committee may remember that last year a Bill was carried through Parliament called the Ministers of the Crown Bill. Indeed, I was myself responsible for piloting it through the House of Commons. We then rearranged the salaries of Ministers, putting them on a more orderly level, and in some cases raising the salaries; and one of the reasons given at that time on behalf of the Government—I gave it myself—was that it was thought that a certain readjustment of salaries, involving raising them in some cases, was justified, among other grounds, on the ground that, when a man became a Minister, he had to pay Income Tax on the whole of his Ministerial salary, and was not permitted to make any deduction on account of expenses incurred. I could not offer that argument to the House of Commons on 28th April, 1937, and now, at the present date, say that, the salaries having been altered, I think it is time to allow this deduction for expenses.

Mr. Ede: It would not be the first opinion you have changed.

Sir J. Simon: The hon. Gentleman is very encouraging, but in my view this is the thing that we cannot do. Whether some day, when we are dealing with the whole subject of a general revision of

the Income Tax law, this is a case which might be reconsidered, I do not know, though frankly I think it operates a little harshly. When a man becomes a Minister, his correspondence with his constituents and so on does not cease, nor does he in practice, as far as my experience goes, do all that work at the expense of the State; and I imagine that a good many Ministers find that the expenses connected with such work are not in fact met out of the salary or out of the provision which is very properly made in the Departments for official purposes. However, I am quite clear that I could riot accept this proposed new Clause, and, therefore, more in sorrow than in gladness, I must tender the Committee my respectful advice that they should reject my hon. Friend's proposal.

9.22 p.m.

Mr. Pethick-Lawrence: This matter has been brought before me on more than one occasion and in varying circumstances, and I think that, at the first blush, I should have been inclined to agree with the hon. Member for Gravesend (Sir I. Albery), because, as the Chancellor has explained, this matter really turns on a technicality. If Parliament, when it gave salaries to Members of the House of Commons, had said that a Member of the House of Commons should receive a salary, and that the salaries of Ministers of the Crown should be diminished, if they were Members of the House of Commons, by the amount of their House of Commons salary, then, I think, they would have been entitled to make the same deduction as a Member of the House of Commons does. But that, of course, was not the case. It was decided at that time that persons who at the same time were Members of the House of Commons and Members of the Government should not receive their House of Commons salary, and therefore, they are not in the position of having any salary from which they can correctly deduct expenses. That, as the Chancellor has explained, is the technical position.
At that time some Members of the Government were only in receipt of £700 a year, and, when a man was appointed to such an office and only held it for a certain number of months, it was quite true that, in view of certain expenses which attached to that office, he might in fact be really worse off through holding


the office for some six or seven months than he was as a Member of Parliament in receipt of £400 a year from which he could deduct expenses. Had that been the position to-day, there would have been a great deal to be said for supporting the hon. Gentleman's proposal, but, in view of the fact that salaries have been very appreciably increased, in the case of the lowest-paid offices particularly, I do not think that equity any more than technical legality would support the hon. Gentleman's claim, and for these reasons I agree with the Chancellor of the Exchequer.

9.25 p.m.

Mr. Maitland: I can well understand that it is rather embarrassing for an occupant of the Front Bench to deal with a matter which has some regard to his personal position, but I am tempted to support my hon. Friend on the ground that this is the kind of case which is very often advanced by the Inland Revenue authorities in other matters and, whilst the right hon. Gentleman described this as an accurate but refined interpretation of the law as it stood, I think the House should be very careful that accurate but refined interpretations should not be responsible for the infliction of hardships upon people who are genuinely desirous of paying their proper proportion of the contributions due from them to the State. I support the Clause because it is a definite and concrete example of the kind of case which often results in a taxpayer in another capacity having to pay a certain amount of taxation which on all equitable grounds he should not be called upon to pay. I hope, although the Chancellor of the Exchequer cannot see his way to accept the Clause on this occasion, that he will be assured that there are others besides the hon. Member for Gravesend (Sir I. Albery) who recognise that here is a definite case where the Treasury is receiving in taxes more than it is equitably entitled to receive. I should be very glad if this might be taken as an example of the kind of case where relief may be given in a way which may not be accurate or refined but may be more equitable.

9.28 p.m.

Mr. R. C. Morrison: I should like to draw attention to a small point which seems to me to be a flaw in the technical argument which the Chancellor of the Ex

chequer developed, and which he was careful to say was not his argument but that of the Department. It was that when a Member of Parliament becomes a Minister of the Crown he becomes automatically an unpaid Member of Parliament and the whole of his salary is liable to tax. It seems to me that not enough attention was paid to the fact that a Member of Parliament cannot become a Minister of the Crown without being a Member of Parliament and cannot remain a Minister of the Crown without remaining a Member of Parliament.

9.29 p.m.

Sir J. Simon: I think the answer to that difficulty is this. You are permitted to deduct expenses wholly, exclusively and necessarily incurred in the performance of the office for which you are receiving a salary. If you are not receiving a salary, there is nothing from which to make deductions. The moment a Member of Parliament becomes a Minister it is true that he remains a Member of Parliament but he ceases to be a Member of Parliament in receipt of a salary and, unless he can show that the expenses that he wants to deduct are expenses due to discharging his office for example as Chancellor of the Exchequer, it is nothing to the point to say, "They are expenses that I have to pay because I am discharging my duty as a Member of Parliament." It is fine-spun but it is a well understood distinction which is sometimes quite important. Incidentally, if the Clause were accepted, if a Minister happened to be in the House of Lords he would be in quite a different position from a Minister in this House.

9.3o p.m.

Mr. J. J. Davidson: I think we can all understand the difficult position in which the Chancellor of the Exchequer is placed. I think he is developing a habit of dealign more with only one side of a particular question and neglecting the other side. True argument cannot really be pressed unless both sides are thoroughly examined. He said that undoubtedly, from a business point of view, it placed a hardship upon Under-Secretaries. It would be much more interesting if we could get one of the Under-Secretaries who have obtained the plums of office to explain some of the general benefits that accrue. There are many things apart from the actual salary. I understand, merely from listening to Debates in the House, that


hostesses seek their company. I understand that week-end parties are given to meet prominent Members of the Government who may be suffering this pecuniary hardship. We have heard of the weekend parties at Cliveden to budding young men who have attained a particular position. I think the right hon. Gentleman could have given some very interesting information. He is an experienced campaigner in that respect, and, if it was possible, I am sure that some of the Under-Secretaries would have given perhaps a more modern version of those benefits.
Then we should keep in mind the difficulties of those who have to work out Income Tax returns. It would be placing a great burden on them to have to deal with the ever-changing Front Bench. Generally speaking, with the benefits to which I have referred and with the extra work that it would place upon the shoulders of an already overworked community, the whole thing would not be worth the candle, as we say in Scotland. I think I can make this offer with safety. I could assure the right hon. Gentleman of a quid pro quo. If he is prepared to withdraw the tax from the Co-operative movement, I am sure the Opposition will support this Clause.

9.35 p.m.

Mr. Garro Jones: No Under-Secretary who is suffering such hardship in existing circumstances has ventured to raise his voice in support of this proposal. That is a circumstance which reveals either considerable poverty of spirit or, at this hour, fulness of appetite. However, I hope to be able to say something in their place. I propose to address a few consolatory remarks to the hon. Member for Gravesend (Sir I. Albery) in view of the fact that his proposal has been turned down. The Chancellor attempted to dismiss it with that air of finality which is one of his forensic methods, but I think we should be able to make out a case that a greater part of the expenses which fall on a Member of Parliament in that capacity ought to be deductible from his Income Tax assessment in his capacity as a Minister.
The first expense of a Member of Parliament is the private office which he keeps for his constituency correspondence and other duties; the second is the secretary, or part-time secretary; the third is

postages and stationery; and the fourth is the extra domicile. It appears to me that Ministers fall into two classes: those whose duties are so important that they are provided with offices and secretarial assistance by the State, and those whose duties are not so important. I cannot say into which class the Minister for the Co-ordination of Defence falls. I am told that he has one typist. However hard it may be on the Under-Secretaries who are not here to-night in not being provided with these amenities, there can be no hardship on the Ministers who are. I have had the honour of serving in various Government. Departments in days gone by, and I never recollect that any Minister with whom I came into contact ever went to the elaborate trouble of separating his postages for constituency correspondence and those required for his official duties. It was never expected that they should, and in fact it wouid not be worth while. The same thing applies in regard to stationery. I am told that it is the rule that Members cannot use official stationery in their private offices without buying it. In the House they can get it free, but if they walk round to Abingdon Street to do their correspondence, they have to pay for it. I think that no Minister who is provided with an office ever pays for his stationery, and it would be foolish to expect that he should.
The largest expense incurred is that of maintaining two domiciles. If the Under-Secretaries showed a little less of that poverty of spirit they would be able to make out a case with the Inland Revenue that maintenance of two domiciles is just as important for a Minister of the Crown as a private Member. I have yet to learn that the tenure of office of a Member of the present Government is so secure that he would be justified in giving up his ordinary residence. Therefore, I put it forward as the suggestion to the Under-Secretaries that they should return to the charge against the Board of Inland Revenue.

9.39 P.m.

Sir I. Albery: I regret that I cannot withdraw the Clause. I was disappointed that the Chancellor and the right hon. Gentleman on the Opposition Front Bench said they could not support this Clause because certain events had somewhat improved the emoluments of Ministers. That


was not the spirit in which the Clause was moved. It was mainly intended to show one of the injustices and inequalities which are occasionally inflicted on the taxpayer. Neither the Chancellor nor the right hon. Gentleman on the Opposition Front Bench has said anything to assure me that
I was wrong in assuming that these injustices do exist.

9.40 p.m.

Mr. Benson: I am very glad we have had the second explanation from the hon. Member as to what was behind this Clause. When it was put down I think we on this side all assumed that the hon. Member felt deeply the grievances of Ministers of the Crown. We find, however, from his second explanation, that, so far from that being the object, it is merely one more step in the continuous battle that hon. Gentlemen opposite are fighting against the Board of Inland Revenue, and part of the attempt to establish that the interpretation of Income Tax law by the board is harsh and unconscionable. In view of the motives behind this Clause, I, personally, am much more inclined to oppose it than I was before I knew what the motives were.

Question, "That the Clause be read a Second time," put, and negatived.

NEW CLAusUSE.—(Prepayment of estate duty.)

(1) For the purpose of facilitating the prepayment of Estate Duty during the lifetime of the taxpayer the Treasury may issue to any person owning an estate on which Estate Duty is payable on his death, a certificate bearing interest at a rate not exceeding 3 per cent. per annum, in accordance with regulations made under this Section by the Treasury, on payment by such person of the amount specified in the certificate and, on the death of such person, surrender of the certificate to the Treasury shall be accepted as satisfaction of the Estate Duty payable on the estate to the extent of the amount specified in the certificate, plus the interest accruing thereon. Hereafter in this Section such certificate is referred to as an Estate Duty prepayment certificate, and such interest is referred to as accrued interest.

(2) Estate Duty prepayment certificates shall be issued in denominations of ten pounds, fifty pounds, one hundred pounds, and one thousand pounds, respectively, which certificates shall be registered and non-transferable: and the owner of an estate may obtain, on due payment, one or more Estate Duty prepayment certificates.

(3) The accrued interest shall not be assessable to Income Tax or Surtax.

(4) Estate Duty prepayment certificates may be redeemed at any time, after three months' notice, but no accrued interest shall be payable by the Treasury on their redemption.

(5) The amounts specified in the Estate Duty prepayment certificates held at the date of death, shall be included in the Estate Duty account along with the remainder of the estate of the deceased person, but the accrued interest shall not be included, and shall be free of all death duties.

(6) In any case in which the amounts specified in the Estate Duty prepayment certificates surrendered under this Section in satisfaction of Estate Duty exceed in the aggregate the amount of Estate Duty payable and any interest due thereon, the excess shall, on the application of the legal representative of the person on whose death the Estate Duty became payable, be repaid to such representative, but there shall be no payment on account of accrued interest.

(7) The Treasury may make regulations under this Section providing for the issue and registration of Estate Duty prepayment certificates for their redemption, for their acceptance on surrender in satisfaction of Estate Duty, and for other matters connected therewith.

(8) Every regulation made under this Section shall be laid before both Houses of Parliament as soon as may be after it is made, and shall have effect as if enacted in this Act: Provided that if an address is presented to His Majesty by either House within the next subsequent twenty-one days on which that House has sat next after the regulation is laid before it, praying that the regulation may be annulled, His Majesty may by Order in Council annul the regulation, but without prejudice to the validity of anything previously done thereunder.—[Sir I. Albery.]

Brought up, and read the First time.

9.42 p.m.

Sir I. Albery: I beg to move, "That the Clause be read a Second time."
This Clause follows on some remarks which I made during the Budget Debates. Taxation has reached a very high level in this country, and it seems to me that it is about time that in some directions we made it easier for the taxpayer to pay. This Clause has certain merits which should appeal to the Chancellor. It is not likely in any way to unbalance his Budget; on the contrary, it appears to me that he would, in all probability, receive a very considerable contribution over the next year or two, when conditions might well be a little difficult. That is one reason why it ought to appeal to the Chancellor. Another reason is that, so far as I can see, he is unlikely to be called upon to repay these sums. It is true that what he has received in prepayment of Estate


Duty will not subsequently be due when the taxpayer dies and the duty on his estate has to be paid. On the other hand, the Chancellor will continue to receive prepayments which will more than compensate him for anything he will lose in that respect. So, from the point of view of the Chancellor, it appears to me to be a complete gain.
I should also like to look at it from the point of view of the general community. It is a well known fact that during the period of depression through which this country recently passed very great inconvenience and a good deal of dislocation was caused owing to the fact that estates had to pay heavy Estate Duty and had to be liquidated at a time when there was no market which could readily absorb the securities which had to be sold. In that respect I believe the acceptance of this Clause would present very great advantages. If the taxpayer is able, in a time of comparative prosperity, when quotations in the City are high, to sell a portion of his securities with a view to making arrangements for the eventual payment of Estate Duty, and put them into the kind of certificates suggested in this Clause, he will have conferred upon himself a considerable advantage—[An HON. MEMBER: "Hear, hear."] I will deal with that point in a moment—and he will have conferred upon the State some advantage, because he will have liquidated his estate when it could easily be liquidated, but without causing inconvenience and dislocation, instead of being compelled to liquidate it at an inconvenient moment.
Just now an hon. Member opposite said "Hear, hear," when I talked about some advantage to the taxpayer himself. I wish to explain that this Clause is not put forward with the primary object either of reducing tax liability or of making the actual tax payments of a taxpayer less. It is put forward in quite a different spirit. It is put forward because I believe it will assist the finances of the country. As regards the provision which I have put in the Clause, admittedly advantageous to the taxpayer, in the shape of interest which will accrue upon his prepayment of Estate Duty, free of tax, and not ultimately to be calculated for duty, I have put in what I believe will be a suggestion sufficiently attractive to induce a considerable amount of prepayment of Estate Duty, but I am not in any way tied to

those conditions. If the Chancellor of the Exchequer believes that less favourable conditions would achieve the same object, I have nothing against it. Something had to be put in, and I put in what, in my judgment, was an advantage to the taxpayer, which would result in large amounts of prepayment, and a corresponding advantage to the Chancellor, and I believe also to the general community; but if it be the opinion of this Committee and of the Chancellor that some advantage less large, some lower rate of interest, would achieve the same object, I would not only willingly agree with that, but I should be equally glad. I only desired to put forward a Clause in a form in which it might be workable. It would be useless to propose a Clause of this kind, trying to induce the taxpayer to save money, to liquidate it at a time when it would be advantageous to the community, and to pay it over to the Chancellor, unless you could provide a sufficient inducement to make him do it. Therefore, it is a question of judgment and opinion, and it does not, in my view, remain a matter of any material importance in considering this Clause.

9.50 p.m.

Mr. Maitland: My hon. Friends and myself seem to have been particularly unfortunate in the Amendments which we have previously submitted, and I hope we may meet with better fortune on this occasion. May I say to hon. Members above the gangway who may be suspicious that this is not an attempt to evade taxation? If they will look at the marginal note, they will find that it deals with prepayment of Estate Duty, payment before the time when it would normally become payable. I think that, particularly in these days of very heavy taxation, it is a fundamental duty on the part of the Chancellor of the Exchequer to do whatever he can to ease the method of payment by which individual taxpayers have to meet their obligations to the State. I suppose that in any new tax which is proposed one of the conditions which appeals to a Chancellor in considering it is the ease with which it may be collected. This Clause in no way whatever deals with the question of liability for tax, but it does deal with a matter which is as important to the Chancellor of the Exchequer as it is to the taxpayer; it attempts to provide some


means by which taxpayers may be enabled to meet their very heavy liabilities.
I am not suggesting that there should be any departure from the well-established principle, which is acknowledged on all sides, that of course the richest citizen must pay the highest tax. There can be no question on any side of the Committee but that it is the wealthy taxpayer who must pay the largest share of the nation's taxation, but that does not do away with the responsibility of this Committee to do whatever is possible to enable the most wealthy taxpayer to meet his obligations with the minimum of inconvenience to himself, and although this suggestion may appear to be novel, I hope it will not be refused on that ground. In these days, when taxation is so very heavy and when large taxpayers have to pay so much to the national revenue, every possible consideration should be given to the individual taxpayers in assisting to meet the very heavy demands which the State makes upon them. Therefore, I trust that this Clause will be considered from that point of view, and from that point of view alone. Its purpose is not to enable a taxpayer to get some benefit out of the Treasury, but to enable him so to make his arrangements that he may have the opportunity of making prepayments to the Treasury in such a way as will cause a minimum of inconvenience to his estate at the time when he has to leave this troubled world.

9.55 P.m.

The Attorney-General (Sir Donald Somervell): My hon. Friend who moved the Clause, particularly, and my hon. Friend who supported it suggested that it might appeal to my right hon. Friend the Chancellor of the Exchequer. There are reasons which I shall put before the Committee, which, I think, will make the Committee see that there are also other reasons why my right hon. Friend would not like to see this proposition accepted. The Clause in essence is that a man may deposit a sum, for which he will receive a certificate bearing interest at a rate not exceeding 3 per cent. to be used for the discharge of Estate Duty. No Income Tax or Surtax will be paid by him on that accruing interest, and the accrued interest, when he dies, will not be subject to Estate Duty. It is in respect of large

estates that what are called windfalls come to the Exchequer of this country particularly in the form of Estate Duty. It is worth while working out exactly how this particular provision would work.
I will take two examples. Take the case of a man who is able in good times to set money aside under the existing law so that there may be a sum to satisfy Estate Duty when he passes away and his children succeed to the property. Let me consider the ordinary case of the man who takes advantage of this scheme and the case of a man who has an income of £50,000 a year. It is in connection with these very large estates that Estate Duty is highest, and, therefore, it is those people who would be particularly exempted under the scheme of my hon. Friends. A man who has an income of £50,000 a year pays something like 135. in the £ Income Tax and Surtax. If you give him, for the purposes of the accumulation and payment of Death Duties, interest of 3 per cent. you will be giving him a rate equivalent to over 9 per cent. It is perfectly clear that he cannot spend it, but this is how it will affect the Revenue. By investing in one of these certificates he would get over 9 per cent. for the money he put down for the purpose of discharging liability for Estate Duty. It does not rest there, because the accrued interest, when he died, would not be liable to Estate Duty. That would be another 5o0 per cent. advantage which he would get over the man, who, under the law as it is to-day, may be doing exactly the same thing.
A provision of this kind would be extremely attractive if you had the good fortune to own large assets, but it would, in fact, be a very serious drain on the Revenue. When one talks about drains on the Revenue, as has been said more than once in the Debates in the course of the Committee stage, one wants always to realise that ultimately what one class of taxpayer saves will have to be collected from another class of taxpayer. This scheme would, I think, be taken advantage of on the whole by those who own large estates and consequently would be liable to high Estate Duty when they passed away, and that would necessarily mean so much less money coming into the Exchequer from such estates. That would be a loss that would have to be made up from other sources.

Mr. Maitland: My right hon. and learned Friend has taken the extreme case. How would this scheme work out in the case of a man with £5,000 or £10,000 who had a business which he was anxious to consider, and who desired to avail himself of a provision of this kind?

The Attorney-General: I could take many examples. In the case of those whose income amounts to iio£10,000 or £15,000, the Income Tax and Surtax would be at the rate of Hs. in the £. That is an all-over rate. Under this scheme you would be allowing such a person 3 per cent. free of Income Tax and Surtax. Under the present system he would receive from securities a gross sum of something like t£7, would pay us. Income Tax and Surtax, and would have £3 left. The reason, therefore, that my right hon. Friend cannot accept a Clause on these lines is that it would mean—though I appreciate that that is not the motive that those with large estates taking advantage of the scheme would pay very much less taxation, Income Tax, Surtax and Death Duties, than they would otherwise pay. There are certain advantages to the State in regard to people who will have to pay large sums as Death Duties making provision in good times so that they do not have to realise value, but there is nothing to prevent that under the existing law. Assume that a man with a certain fortune says "I want to provide that when I die, after paying all duties, my wife and family shall have V(£X net." There is nothing to prevent him so arranging his life so that year by year he could put aside, in War Loan or whatever it may be, such sum as was necessary. The proposed new Clause would give a preferential advantage to certain people, and it cannot be justified. Therefore, I would ask the Committee not to accept it.

10.5 p.m.

Sir I. Albery: In this case, also, I regret that I am unable to withdraw the proposed new Clause, because in so doing I should be admitting that the arguments advanced against it are convincing, and that is not in any sense my view. I stated carefully that the question of the rate of interest or the advantage that the taxpayer would get does not enter into the argument. I had to put down some figure. The right hon. and learned Gentleman in his reply has taken that figure, and no doubt statistics have been

prepared for him on which he has spoken about a 9 per cent. advantage. I am unable to understand the calculation, but I do not stress the point, because it has no bearing on the matter. If that is the rate, then let it be reduced accordingly. The only object that I have in view is to achieve an advantage which, as I stated in moving the Clause, would give to the taxpayer simply a sufficient advantage to make him enter into the scheme. It is obvious that he is not going to prepay his tax if he does not get anything for doing it. I am sure that when the right hon. and learned Gentleman goes to his tailor if he pays cash he gets some advantage which is not obtained by the gentleman who does not pay cash. That is the ordinary commercial practice, and even Governments cannot get away from it. Even the Chancellor of the Exchequer cannot raise money without taking into account the time of payment and the rate of interest. Therefore, it is obvious that any taxpayer who is prepared to pay his tax in advance should get some advantage out of it.
The only argument of the right hon. and learned Gentleman that could be accepted would be if he had satisfactorily refuted what I said about the scheme and he showed that the advantages which I claimed for it would not exist, and if he also showed that inconveniences do not arise from time to time when Death Duty has to be paid on large estates in times of depression. If those statements were wrong, he would have had some justification for refusing the Clause, but, so far as I know, not one of those arguments that I put forward has been refuted. The whole substance of the right hon. Gentleman's argument has been a purely mathematical one. He says that the terms would give some advantage to the taxpayer who pays his tax before it is due. Does he think that any taxpayer is likely to pay his tax before it is due, unless the State gives him some advantage for doing it? I say that the matter is worthy of consideration. I never expected that the Clause would be accepted. We go very slow. The Chancellor of the Exchequer is a cautious man, but I submit that the question is worth reconsideration.
There is one last thing that I would say. What is the alternative that the taxpayer has at the present time? He usually has to take out insurance policies. Why should the taxpayer not settle his in-


debtedness to the State on an ordinary commercial basis, with discount for cash? Why should he have to go to a third party and pay them a large profit in order to enable him to settle his indebtedness to the State? All that I am suggesting—and it ought to commend itself to hon. Members opposite—is to cut out the middleman and to allow the taxpayer to deal direct with the State, on a businesslike basis, instead of driving him to an insurance corporation, and making him pay them large profits for doing it. In the circumstances, I regret that I cannot withdraw the Clause.

Question, "That the Clause be read a Second time," put, and negatived.

NEW CLAUSE.—(Amendment of 24 and 25 Geo. 5. c. 32, s. 1.)

Sub-section (2) of Section one of the Finance Act, 1934 (relating to the alteration of Customs duties on Colonial sugar, molasses, etc.), shall hve effect as though the words "but the quantity of sugar in respect of which such certificates are issued shall not in the financial year ending on the thirty-first day of March, nineteen hundred and thirty-five, exceed three hundred and seventy-five thousand tons, and shall not in any subsequent financial year exceed three hundred and sixty thousand tons" were deleted there-from.—[Captain A. Evans.]

Brought up, and read the First time.

10.11 p.m.

Captain Arthur Evans: I beg to move, "That the Clause be read a Second time."
The Clause relates to the extension of Imperial Preference to sugar credits in the British Colonial Empire, with particular reference to the West Indies. The effect of the Clause, if my right hon. Friend the Chancellor of the Exchequer finds himself able to accept it, will be purely permissive. It would enable the Treasury to extend the special preference certificate to any amount of Colonial sugar imported into this country up to a total tonnage of 997,000, which is the total permissible export from the West Indian Colonies to this country under the terms of the International Sugar Agreement. As the Committee is well aware, at the present time, under the restrictions contained in the Finance Act of 1935 the Treasury is allowed to issue special preference certificates up to 360,000 tons of sugar per annum. I understand that the Government have already laid it down

that the number of these certificates will be decreased when the world price of sugar has reached per ton. We know that the price is L£5 a ton.
If the new Clause is accepted the Chancellor of the Exchequer would then be enabled to allow the Treasury to vary the amount of the special preference certificates which are isued from time to time in accordance with the world price of sugar obtaining at the moment. Therefore, it must be clear to my right hon. and gallant Friend the Financial Secretary that the acceptance of this Clause does not commit the Treasury to one penny of fresh expenditure, unless they so desire and the conditions so necessitate. It will, however, free the hands of the Chancellor of the Exchequer to take the obvious and, in my modest judgment, the only possible action if the International Sugar Council at their meeting next month fail to persuade certain foreign countries who are parties to the International Sugar Agreement to reduce the quotas which they are at present enjoying, with a view to stimulating the price obtaining for sugar in the world to-day.
Some weeks ago, in another place, the Under-Secretary of State for the Colonies used these words:
 We signed the Agreement in June, 1937, and we are certainly not going to go back on our word now. We shall stick to our signature, but it is quite clear that if prices continue to be so unsatisfactory as at present, so that the Colonial sugar producer is quite unable to make a livelihood or to pay a proper rate of wage, something must be done.
It is clear that if this unfortunate state of affairs continues and the International Sugar Council fails to stimulate the price of world sugar and fails to find a solution to the economic problem, this Clause would enable something to be done and done immediately by His Majesty's Government. I do not desire at this late hour to weary the Committee by repeating the arguments I adduced on the Committee stage of the Colonial Office Vote. The Committee is well aware by this time, from the Debates which have already taken place and from the prominence which this important matter has received in the Press of the country, of the lamentable conditions which obtain in the West Indies at the present time, particularly vis-a-vis the economic outlook. However, in order to make my argument clear I must quote a few figures


to show the assistance which sugar producers are getting in various parts of the Empire. The price received to-day by the British West Indies and other Colonial producers of sugar is gi£8 lo10s. per ton. Cuban producers, as a result of the preference granted by the United States of America, receive an average of L£9 per ton. British beet sugar is guaranteed by this House a minimum price of £15, the Australian producer receives in Australia £22 per ton, and the South African producer a little over that figure. These are conditions which make it practically impossible for the producer of sugar in the Colonies to obtain a higher price for his product and so improve conditions which have shocked the conscience of the whole Empire.
I do not desire to-night to anticipate or to attempt to prejudge any of the issues which will rightly come under the review of the Royal Commission which is shortly to be appointed by His Majesty's Government, but I feel that one thing is quite clear, that whatever their findings and recommendations may be they cannot deal with the economic depression which is at present crippling these Islands, and in the long run the Colonies and indeed this country must look to the economic aspect of the case which is largely governed by the world price of commodities. I need only quote the Colonial Secretary to support me in that view. Speaking in this House on r4th June, when he introduced the Colonial Office Vote, he used these words:
These Colonies… depend almost entirely on their exports of a comparatively small number of commodities like sugar, cocoa, bananas, and a few other things. They depend almost entirely for their wellbeing on what price they can get for those commodities in the markets of the world. If the price is good, so much the better; if the price is had, it is something like a disaster for those West Indian Colonies. If the price is bad, it quickly becomes beyond the power of those Colonies, out of their own resources, either by public or private enterprise, to give the peoples of the Colonies secure employment, good wages and good conditions."—[OFFICIAL REPORT, i14th June, 1938; col. 88, Vol. 337.]
No one who has studied this problem from the economic point of view, or from the point of view of improving the social conditions in these islands, can possibly quarrel with the view of the Colonial Secretary. Unfortunately, the conditions to which my right hon. Friend referred cannot be altered in any way by any

recommendation of any Royal Commission. These fundamental economic conditions must of necessity be a matter for the whole Government and the financial policy of the Chancellor of the Exchequer. It is clear, I think, that it is impossible to improve the wages in the West Indian Colonies, particularly in the sugar industry, unless some practical assistance is given to the industry as a whole. I say that because I noted with interest only the other day that those countries which are interested in what is known as the free sugar markets of the world, Java, Peru and San Domingo, pay a wage of only between 4d. and 6d. per day, precisely on account of the low sugar prices which prevail. I do not wish to argue to-night whether the wages paid by the sugar industry in the West Indies are adequate or inadequate, for that is obviously a question for the Royal Commission; but I think it is interesting to observe—if we are anxious to examine the economic basis of this industry to see whether it is possible to make it a paying proposition and so set the islands on their feet—that before the recent riots few, if any, of the decent-sized sugar estates in the British West Indies paid less than an average of 3s. per day.
I am not suggesting that that is an adequate or an inadequate wage, but I invite the Committee to consider that those producers, paying that rate of wages, are having to compete in the free sugar markets of the world with Java, Peru, and San Domingo, which are paying wages of 4d. and 6d. a day. We know, of course, that through causes which are admittedly outside the control of His Majesty's Government, the price of sugar has fallen by 25 per cent., and as was stated in the House by practically all the speakers in the Debate on the Colonial Office Vote, it is clear that the population of these islands, at a time when labour conditions were difficult and when employment was decreasing, was increasing at an alarming rate. I find, in studying the statistics that over the last ro years the population has increased in Jamaica alone by no less than 21 per cent. It may be argued that sugar is only a factor in this situation, and that it is not the whole problem which has to be faced; but we all know that the other commodities in which the islands are interested have also fallen in value, except bananas, which unfortunately are suffer-


ing from a very serious disease. I need only quote the view of the President of the United Fruit Company, who I think is admitted to be the greatest authority on the banana industry. He said:
The valuable Jamaica banana crop, which is the mainstay of that island at the present time, is likely to suffer severely from disease during the course of the next two years.
Therefore, I think it is clear that we cannot look to the banana industry for any practical help in this matter, and that brings us back to the situation with regard to sugar. A well-known authority on the economic situation in the West Indies, Mr. De Lisser, who, as the Committee is probably aware, is the general secretary of the Jamaica Imperial Association, used these words the other day:
Even as matters stand to-day, unless a better price is obtained for sugar, it will not be possible for the factories and estates to continue to pay the wages they have agreed to pay, with the consequence that the present troubles will be but the prelude to a still more serious situation.
My right hon. and gallant Friend when he replies may say, "But the balance-sheets of the West Indian sugar-producing companies do not bear out this talk of distress." I think it fair that one should anticipate an observation of that kind and draw the attention of the Committee to the fact that the balance-sheets which my right hon. and gallant Friend possibly has in mind relate to the prices which obtained last year and which were considerably higher than the present prices. The average over the 12 months to 1st October, 1937, was 6s. per cwt.; to i1st April, 1938, it was 6s. 7½213d.; to 1st June, 1938, it was 5s. 7d. and to i1st May of this year it was 5s. 3d. Being anxious to give as fair a picture as I could of the situation I was at some pains to study the sugar market reports issued at the end of last week's business, because I observed that, in spite of the optimistic views expressed by my right hon. Friend the Secretary of State for the Colonies as to the possible outcome of the meeting of the International Sugar Council on 5th July, the prices of colonial sugar have continued to decline. I quote this extract from the report of a leading firm of brokers in the sugar market:
The tone weakened perceptibly at the end of this week and final quotations show a decline of 2½d. per cwt. from the recent

highest. Lack of trade support and a less optimistic feeling concerning the coming meetings of the International Sugar Committee were the chief factors in causing the downward movement. Professional opinion has never regarded the International Agreement with favour and its inability to grapple with the situation effectively has been evident from the outset. The plain truth is that there is too much sugar available under present conditions and unless the signatories recognise this fact and agree voluntarily to the necessary reduction in quotas, the Agreement will continue to be a failure. However, the British Government can and doubtless will use all its influence to create an improved state of affairs and the market awaits the issue with considerable interest.
It is rather discouraging to find that on the eve of the meeting of the International Sugar Council, in which His Majesty's Government place great hope, the price of sugar continues to decline. When we bear in mind that freights, cost of material and in a particular minor instance wages have increased, I think we must realise that if we are anxious, as we are honestly anxious, to see an adequate rate of wages paid in the West Indies, and proper conditions of labour obtaining there, then we must take some practical action to assist those producers in disposing of their produce. Whatever the recommendations of the Royal Commission might be, we all want to see the better conditions for labour to which I have referredproper housing, extended education and adequate health services. I submit, in view of the economic arguments I have ventured to present, that it is only by assisting the sugar industry in a practical way that these results can be obtained. It is clear that a cash export crop is necessary for the economic prosperity of the islands and the only crop that fills the bill and for the production of which on a large scale the West Indians are eminently suitable, is sugar. Therefore, in conclusion, I beg my right hon. and gallant Friend to free himself from the present restriction and so arm himself with an instrument which can be used successfully, irrespective of the effectiveness or otherwise of any decisions which might be reached by an international body, thus facilitating the task of the Royal Commission shortly to be appointed and send to the West Indies a message of hope and a practical assurance that something will be done in the near future.

10.32 p.m.

Captain Wallace: It will be perhaps for the convenience of the Committee


at this late hour if I intervene at once in order to indicate the views of my right hon. Friend the Chancellor on this important new Clause. Sub-section (1) of Section 1 of the Finance Act, 1934, provides that the general preferential rebate of duty for Colonial sugar shall be the same as for other Empire, that is Dominion, sugar, and also that there shall be a special additional rebate for Colonial sugar which is "accompanied by a quota certificate." This rebate is of 3s. a cwt. at a polarisation of 95 to 96 degrees and of corresponding amounts at other degrees. Sub-section (2) defines the quota certificate as a certificate issued by the Secretary of State for the Colonies certifying that the sugar forms part of the quantity of sugar which may be imported from the Colonies at the rates specified; it also imposes the limitation that for the financial year 1934–35 the quantity of sugar in respect of which these certificates were issued should not exceed 375,000 tons, and that in every subsequent financial year it should not exceed 360,000 tons.
If the new Clause were accepted it would repeal the limiting proviso of 360,000 tons and would empower the Colonial Secretary to determine, by the issue of quota certificates, what quantity of imported Colonial sugar should in any year be allowed the additional rebate. It would be competent for him, if the Clause were carried, to certify for this purpose at his discretion any part or the whole of the imports of Colonial sugar. In an answer a few days ago to my hon. and gallant Friend the Member for Accrington (Major Procter) who asked what the cost of such a proposal would be, I replied that if it were pressed to its logical conclusion the additional cost to the Exchequer would be up to £3,000,000 a year. But I do not want at this moment to stress particularly the point about loss of revenue, because I wish to deal with this Clause on somewhat different lines. My hon. and gallant Friend who moved the Clause wrote to the Colonial Secretary on 2nd June and stated that in his view a proposal of this kind (carrying with it, by implication, the corollary that the number of certificates would be largely increased) was one of the few practical methods of giving assistance to the sugar industry in the West Indies, and he suggested that such action should be taken without waiting for the despatch, much

less the report, of the Royal Commission which it is proposed to send to the West Indies.
My hon. and gallant Friend also argued during the Debate on the Colonial Office Vote on r14th June that the fact that there had been set up an International Sugar Council for the purpose of regulating exports of sugar, and thereby assuring to the producers a price which would enable them to give decent conditions, did not relieve the Government of the responsibility for improving the economic conditions of the West Indies. I must point out that the hon. and gallant Member for the Isle of Wight (Captain P. Macdonald) said that he did not think that the sugar preference alone would save the economic position, a view with which, I think, my hon. and gallant Friend agrees. The object of this International Sugar Agreement, to which my hon. and gallant Friend has referred, which was signed on the 6th May, 1937, and came into operation provisionally on 1st September last year—the Committee will remember that we have already passed a Clause in this Bill dealign with the stabilisation of the Imperial sugar preference—was to bring about a better relation between the supply of and demand for sugar by regulating the export of sugar throughout the world. In this Agreement the British Empire was treated as a single unit and, therefore, as a sugar-importing and not a sugar-exporting country. In the Debate on 14th June the Colonial Secretary expressed very frankly the view that the Colonial sugar preference, despite its very generous value to the producers of L£4 15s. per ton, had failed to rehabilitate the sugar industry in the West Indies and other Colonies owing to the large excess of supplies over demand in the world market. He also admitted the failure for the time being of the International Sugar Agreement to provide a remedy owing to unforeseen disturbing factors in the world, of which, perhaps, the principal is the Sino-Japanese conflict. As regards a solution of this sugar trouble, he said:
I believe that we have to look for it through the machinery of the International Sugar Council, and that we have to try to persuade the Council to alter the quotas for production so that they are reduced in conformity with the reduced demand for sugar in these times."—[OFFICIAL REPORT, 14th June, 1938; col. 90, Vol. 337.1]
The Colonial Secretary went on to say that the Council were meeting again in the


early days of next month, and that he hoped they might be persuaded by further voluntary reductions in the supplies coming from foreign countries into the free market, to get equilibrium once more established. At any rate, in the view of the Colonial Secretary, which I think will command considerable respect in this House, the International Sugar Council is the right and proper machinery for dealing at this moment with the situation.
There is actually a further objection to the proposed new Clause of my hon. and gallant Friend, but unless the Committee particularly wants me to do so I shall not elaborate it at this time of night. It is that Canada also gives a preference upon Empire sugar. In 1932 that preference was greater than the general British Colonial preference, but owing to the fall in the exchange value of the Canadian dollar, our preference here became more valuable than the Canadian preference, with the result that West Indian sugar was diverted from Canada to this country. The present arrangement was designed to make the British preferential rebate on Colonial sugar of less value than the Canadian, except for the fixed quantity of 360,000 tons, which has already been mentioned, and which is sugar which would have come into this country in any case. It would be a mistake to disturb that kind of inter-Imperial equilibrium.
I fully appreciate the general considerations advanced by my hon. and gallant Friend, but I am certain that what is at the back of his mind is largely, if not wholly, the necessity for assisting the West Indies. I must point out to the Committee that an increase in the sugar preference for the Colonial Empire at large, such -as would be made possible if this Clause were accepted, appears to be a somewhat extravagant method of applying a remedy. If the Clause were passed and the Secretary of State for the Colonies certified all the sugar that he could certify, a very substantial proportion of it would be other than West Indian sugar, and the assistance would accrue to other Colonies, in particular to Fiji and Mauritius.
I have tried to put these points as succinctly as I can. I would say, in conclusion, that the reason why I suggest that my hon. and gallant Friend should withdraw this proposed Clause can be summed

up by recalling the views of the Colonial Secretary, who is the best person to judge on these matters, that it will be wisest to deal with this matter at present through the International Sugar Council.

Sir P. Hannon: Will the terms of reference of the Royal Commission which it is contemplated to set up in relation to the West Indies, enable the commission to study the sugar situation?

Captain Wallace: My hon. Friend has rather got me out of my depth, but I do not imagine that a Royal Commission going upon a mission of this kind would not include this question among those which it considers.

10.44 p.m.

Captain P. Macdonald: I support the arguments advanced by my hon. and gallant Friend the Member for South Cardiff (Captain A. Evans), in moving this Clause, and I must say that the answer of the Financial Secretary to the Treasury was very disappointing after the very able arguments put forward by my hon. and gallant Friend. As was pointed out at the outset, the proposed new Clause is only permissive. It empowers the Chancellor of the Exchequer or the Colonial Secretary, or whoever is their representative, to increase the preferential duty to £2 per ton beyond the 360,000 tons to which it is now limited. The argument of the Financial Secretary was that if the total exports of West Indian sugar were included the Exchequer would be involved in an expenditure of £3,000,000. That is a very feeble argument. We do not ask that the total exports of West Indian sugar to this country should be included, but we strongly urge that powers should be given to the Colonial Secretary to extend the preference beyond the 360,00o tons to which it is now limited, in order that he might have a valuable bargaining weapon when he entered into this International Sugar Convention. I do not share his optimism as regards the outcome of this convention. I could give many reasons why I think it is doomed to failure. The chief arguments have already been put forward by the Mover of the Clause when he said that the other countries taking part in the convention are already receiving such enormous subsidies and preferential duties from their own countries that it is not in their interest to meet us in this connection.
I am not going over the same ground again, but will only refer to one or two cases. Cuba has been mentioned. It does not matter very much if Cuba, which sells 2,000,000 tons of its present production of 3,000,000 tons to the United States under a bigger preference than our own producers enjoy to-day. Java and San Domingo have been mentioned, and wage conditions have been compared. If all these factors are taken into consideration, I do not see any hope of success for any international sugar convention unless the representative of the sugar islands in our Colonial Empire is in a position to have some bargaining weapon such as this Clause would give. He would he in a much stronger position if he were able to say, "The House of Commons has included a Clause in the Finance Bill which compels us to increase the preference of £3 per ton which our Colonial sugar enjoys to-day provided you do not meet us in stabilising world prices for sugar." That is the basis of the whole argument; it is purely economic.
Last week we had a Debate on Colonial affairs, and a very sad picture was painted by Members in all quarters of the House of the conditions in the West Indian Islands to-day. The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) nearly brought tears to the eyes of Members of the House whc.en he pointed out the social conditions prevailing in Jamaica at the present time. He said he had just returned from a visit there, and would not keep a dog under similar conditions to those in Jamaica at the present time. I can endorse everything he said in that regard, because the conditions are appalling. No one denies that that is the fact. The Colonial Secretary said he was so impressed by the arguments that he was setting up a Royal Commission to go and investigate and report on the conditions. He also said, and it is a fact, that these sorry conditions have come about largely through economic factors. I did not maintain on that occasion, and I do not maintain nog;w, that sugar is the dominating factor in these arguments, but it is a very important one.
Sugar is the one crop that we know the West Indies can produce, and, if the West Indies are given an opportunity, such as this Clause would give them, of increasing their production of sugar and increasing their markets for sugar, we know that at

any rate that is one sphere in which we can assist these sugar islands, for which we are responsible, in their present very sorry economic plight. In spite of what the right hon. and gallant Gentleman says about the attitude of the Chancellor and the Colonial Secretary, I urge him to reconsider the matter and to accept the Clause. It is purely permissive and it need not necessarily be made use of, but it is a very useful bargaining weapon and one with which he should arm himself when the colonial representatives meet the International Sugar Convention.

10.51 p.m.

Vice-Admiral Taylor: I fully realise that the Colonial Secretary appreciates the serious position of the sugar industry in the West Indian Islands, and acknowledges the justice and the urgency of the Clause that some material assistance must be given to the sugar-producing Colonies. My right hon. Friend places his hopes for a solution of the problem on the finding of the International Sugar Committee. Not so very long ago the Colonial Secretary admitted that the International Sugar Agreement had already failed to find a solution, and I should like to ask my right hon. Friend on what he bases his hope that the Committee will now be able to find a solution, which they failed to do in the past. We have not been informed what new factors have come into being which will enable them to solve the problem. If he contemplates that the Committee will suggest a reduction of the quota all round in order to raise the price of sugar, that would reduce production, increase unemployment and aggravate the serious position in the West Indies. It would still further lower the standard of living of the inhabitants, and that is the last thing that we desire to happen, especially in view of the recent most regrettable outbreaks, due in the main to economic conditions, the low standard of living, bad housing conditions and lack of employment. Whatever the reasons are the Royal Commission will inquire into the whole matter and will, no doubt, propose measures to remedy the situation. But it must not be forgotten that we in this country are directly responsible for the welfare of the inhabitants of our Colonial Empire. To no other nation can they, or should they, turn for assistance. We should not shirk that responsibility.

The Chairman: The hon. and gallant Member should keep to the subject of the


Clause, and not discuss matters which are remote from it.

Vice-Admiral Taylor: I have said we must not shirk our responsibilities to our Colonial Empire and the sugar industry on which they depend.

The Chairman: The hon. and gallant Member need not repeat it. I have already said that that is remote from this Clause.

Vice-Admiral Taylor: The history of the sugar industry in the West Indies is deplorable. There is no certainty for the sugar producers. They are entirely dependent on the world price for the prosperity of that industry. They have no alternative industry to which they can turn. Their lack of prosperity has not been their fault, but ours. If I am in order, I would like to draw a comparison between the small island of Porto Rico, under the Government of the United States of America, which is also a sugar-producing island, and our West Indian Islands. This very small island, only three-quarters of the size of Jamaica, is now supporting a population half as great again as Jamaica, and in 1936 it exported almost entirely to the United States as much as the export of the whole of the West Indian Islands taken together. That is not a very satisfactory parallel, so far as we are concerned. If one island can be rendered as prosperous as that, other islands in the same area, with the same climatic conditions and soil, could also be made as prosperous and their people could be living in the same prosperous and contented conditions.
The Colonial Empire, so far as sugar production is concerned, is in a very disadvantageous position. In Australia and Natal, which are both sugar-producing countries, no sugar is allowed to be imported. They have a sheltered home market. The world price is not a matter of vital importance to them, although naturally it affects them. They already have a high price in their home market. They also, I am glad to say, get a preference in this country. So far as the beet sugar industry, which has already been referred to, is concerned, they have already a guaranteed minimum price. But when we come to the export of Colonial sugar, we find that they only

obtain, together with their preference and with the preferential certificates, a sum of £4 15s. a ton for their sugar. That preference is not sufficient in view of the low price of sugar in the world market to-day. To them the world price is the deciding factor. They are never certain as to what their position will be. They are entirely dependent upon the world price; there is no reasonable certainty for their sugar industry. If we desire that this position shall no longer obtain in the West Indies, it is necessary for us to take some definite action, either in giving a greater preference or in giving this permission for the extension of preferential certificates. There is no other way in which we can give the Colonial producers a more stable industry, more employment for their people, and more contentment, which we all so ardently desire. It is a responsibility that falls upon us, and the question of the price that we shall have to pay for it should not be the main consideration.

11.1 p.m.

Brigadier-General Sir Henry Croft: I regret that, no doubt for very good reasons, the Colonial Secretary is not here in order to give us his advice, because we understood from him that the Royal Commission certainly was not primarily going to Jamaica to deal with the sugar question. The present position in Jamaica is entirely economic, and the situation undoubtedly depends upon three products, with regard to only one of which can we assist at present. What does my hon. Friend propose? He is asking the Government to consider whether it is not wise to take permissive powers in order that if the Sugar Convention does not meet the situation, he will be able to take subsequent action. To wait for a Royal Commission which may take two years to report, when everybody knows the situation in that island, seems to very many of us to be wholly unreasonable. If the Chancellor were to give us an assurance that this matter would receive reconsideration, it would give a great deal of happiness to a large number of people here, and at least would convey to those people in the West Indies, who have a vast surplus stock, the hope that this House will really tackle this question. I think it would be a new hope.
If the right hon. Gentleman can give no such hope, I confess I hope my hon.


Friend will go to a Division. Otherwise we must realise that, unless we are able to sustain the three staple industries in the West Indies by some means or other, this House will have a great sum to pay in the days to come. Therefore, from every point of view, and particularly- from the point of view of restoring the economics of that country, the only possible way is to give help to these people. I hope my right hon. Friend will not turn down this proposal in the somewhat abrupt manner which we have heard this evening, but that he will endeavour to meet the suggestion made, which does not commit the Chancellor or the Committee, but merely gives him power to act should to find that the Sugar Convention, when it meets, does not meet the situation. Many of us think the Sugar Convention's original arrangement gave a very poor deal for the British Empire as a whole, and it is surely time, as we have our responsibilities in the Colonial Empire, that we should see that they receive a fair deal. I hope my right hon. Friend will be able to give us some encouragement.

11.5 p.m.

Captain Wallace: Perhaps I did not make myself sufficiently clear. I should like to repeat again the words of the Colonial Secretary on the Colonial Office Vote on the 14th June. He was referring to the International Sugar Council and said that they were meeting again in the early days of next month, that that was the right and proper machinery for dealign with the present sugar difficulties, and that at least we have to exhaust the possibilities there before we begin to explore any other possible solution of the trouble. That seems to me to be the answer to this Clause. My right hon. Friend has said he feels that we should exhaust the possibilities of action by the International Sugar Council before we look round for some other solution. It appears to me that, if the Sugar Council fail, then will be the time to consider some other solution. If I gave my hon. and gallant Friend or the Committee the impression that I was turning down this Clause in an abrupt manner, I offer them my sincere apologies.

Sir H. Croft: I apologise for using the word "abrupt." What I meant to say was that the effect of the reply to my right hon. and gallant Friend was an attempt

to turn down the question. Is it not the fact that, supposing the Sugar Council does not fulfil these hopes, already so sadly disappointed previously, is not my right hon. and gallant Friend aware of the fact that a whole year will go by before we can take any action at all, and that is why I ask whether he cannot give the matter further consideration.

11.7 p.m.

Mr. C. S. Taylor: I rise to support the Clause because I look upon it as an insurance policy. If the Sugar Council fails, as my hon. and gallant Friend the Member for Bournemouth (Sir H. Croft) has said, we shall have to wait for another year. This Clause is a very moderate Clause. It does not ask for the total exclusion of foreign sugar, or of Cuban dumped sugar, which I should like to see. There is no doubt that, if this Clause were passed, in time to come we might see a rise in the price of sugar in this country. Then we should see the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) come down and reduce the House to tears, saying that the price of sugar to housewives in this country had gone up. Having been to the West Indies very recently I realise that you cannot have your cake and eat it. [Interruption.] Perhaps I should say you cannot have your sugar arid eat it. If we want to see better conditions in the West Indies a sacrifice will have to be made somewhere. If Cuban dumped sugar were kept out of this country altogether, it is estimated that the housewife in this country would have to pay something as small as a farthing increase on her sugar, and even then sugar would still probably be lower in price in this country than in most countries of the world, certainly than in the United States of America.
This is an insurance policy. Supposing the Sugar Council were successful this Clause would not be operative, but if the Sugar Council were to break down and we did not see any really good effects we should be able to fall back on a Clause which makes provision for that case. I hope that, after the appeals which have been made from all sides—and I feel that hon. Members opposite must support this Clause—my right hon. and gallant Friend will help us and help the West Indian Islands by agreeing to accept the Clause.

11.10 p.m.

Sir P. Hannon: I wish to express my respectful disappointment at the reply of my right hon. and gallant Friend. At the present time His Majesty's Government contemplate the appointment of a Royal Commission to deal with a very serious economic and social situation in the West Indies, and I think it would have been helpful to that Commission if my right hon. and gallant Friend had made a little more generous concession on the Clause. The West Indian Islands at the present time are in a very difficult and embarrassing situation, and any gesture from this House which indicated the anxiety of the Government to help them out of their difficulties, would be most welcome. Therefore, I am glad to see the Chancellor of the Exchequer now present, and I hope he will see his way, pending the findings of the International Sugar Council, to give some indication that if the findings of that council are not favourable to the development and expansion of the sugar industry in the West Indies, His Majesty's Government will take definite action in order to improve the situation.
I regret that the Secretary of State for the Colonies is not able to be present. A great responsibility rests with him in relation to the future of the West Indian Colonies. I do think that in dealing with this question which so much affects the economic and social progress of the West Indies, there might have been a more generous gesture to people who have been most loyal members of our Imperial family for generations. We founded our Navy years ago in these small communities of the West Indies, where the sugar industry is of such vital importance.

11.13 p.m.

Captain A. Evans: My hon. Friends who have supported the Clause, and I were anxious to be convinced by my right hon. and gallant Friend. I regret exceedingly that I must join in expressing my disappointment, because, if I understand him aright, the view of His Majesty's Government is that, having regard to the statement made by the Colonial Secretary when the vote was before the House, the Government are more or less pledged not to take any action until they are quite satisfied that the negotiations at the International Sugar

Convention prove futile. We are not asking His Majesty's Government to take any action at this stage. If this Clause is accepted the Government will not be compelled to take any action. They will be arming themselves with an instrument, so that in the regrettable event of the negotiations proving a failure, they will be enabled to take practical action to assist the Colonies immediately.
There was another point in my right hon. and gallant Friend's speech in reply to an interjection by my hon. Friend the Member for the Moseley Division (Sir P. Hannon) which was rather alarming. He said definitely that one question which the Royal Commission would obviously consider is the question of the future economic position of sugar.

Captain Wallace: I prefaced my reply to that interjection by my hon. Friend the Member for Moseley (Sir P. Hannon) by saying frankly that he had caught me rather unawares. All I did was to express my own personal and impromptu opinion that the Royal Commission would probably take cognisance of such a situation; that is not to be taken in any way as an official pronouncement on the terms of reference.

Captain A. Evans: I apologise if I have in any way misrepresented his remarks, because I quite understand that that is the only conclusion to come to in view of the present state of affairs, and it is reasonable to suppose that one of the first and most important subjects to come under the consideration of the Royal Commission will be the state of the sugar industry. But that was not the view of the Colonial Secretary. On 7th May I asked him this question:
whether in view of the cycle of riots and strikes which the British West Indies have experienced since 1935, largely as the result of the present state of the sugar industry, he will consider the appointment of a Royal Commission to investigate the whole question of the future of this industry and the conditions of the people employed therein?
My right hon. Friend replied in these words:
My Noble Friend is only too well aware of the series of distressing incidents, of the kind to which my hon. and gallant Friend refers, during the last year or two; but he does not share his view that a Royal Commission into the sugar industry is warranted. The economic difficulties of the sugar industry arise from circumstances of a worldwide character and there already exists an


International Sugar Council which is charged with the duty of trying to find means of overcoming them."—[OFFICIAL REPORT, 11th May, 1938; col. 1571, Vol. 335.]
If that reply means anything at all it certainly means that for the time being His Majesty's Government have pinned their faith not on the recommendations of the Royal Commission but on the machinery set up under the International Sugar Agreement of 1937. We therefore must press the new Clause. If we do not and the Government are faced with a breakdown of the machinery of the International Sugar Agreement they will have to come to this House for further legislation to give effect to their views. If they accept the new Clause it will not commit them to any action, but other countries who

are involved in this complicated economic difficulty will realise that if they fail to reach a fair agreement there are means at the disposal of the Government to deal with the matter on a fair basis so far as the West Indian Colonies are concerned. In view of the fact that we are not asking the Government to commit themselves to any expenditure I hope they will reconsider the matter, accept the new Clause, and then if on further consultation they are still of the opinion which the Financial Secretary has expressed they will be at liberty to make an Amendment on the. Report stage.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 12; Noes, 226.

Division No. 255.]
AYES.
[11.24 p.m.


Croft, Brig.-Gen. Sir H. Page
Macdonald, Capt. P. (Isle of Wight)
Smiles, Lieut.-Colonel Sir W. D.


Greene, W. P. C. (Worcester)
Nall, Sir J.
Taylor, Vice-Adm. E. A.(padd.,S.)


Gretton, Col. Rt. Hon. J.
Perkins, W. R. D.



Herbert, A. P. (Oxford U.)
Petheriok, M.
TELLERS FOR THE AYES.—


MacDonald, Sir Murdoch (Inverness)
Poole, C. C.
Captain Arthur Evans and Mr.




C. S. Taylor.




NOES


Aocland-Troyte, Lt.-Col. G. J.
Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs)
Hall, G. H. (Aberdare)


Adamson, W. M.
Cranborne, Viscount
Hambro, A. V.


Agnew, Lieut.-Comdr. P. G.
Crooke, Sir J. Smedley
Hannah, I. C.


Albery, Sir Irving
Crookshank, Capt. H. F. C.
Hannon, Sir P. J. H.


Anderson, Rt. Hn. Sir J. (So'h Univ's)
Crowder, J. F. E.
Harbord, A.


Anstruther-Gray, W. J.
Culverwell, C. T.
Harris, Sir P. A.


Asks, Sir R. W.
Daggar, G.
Harvey, T. E. (Eng. Univ's.)


Assheton, R.
Davies, C. (Montgomery)
Moslem, Sir J. (Bolton)


Astor, Major Hon. J. J. (Dover)
Davies, S. O. (Merthyr)
Hayday, A.


 Attlee, Rt. Hon. C. R.
Day, H.
Heilgers, Captain F. F. A.


Baldwin-Webb, Col. J.
De la Bère, R.
Hely-Hutchinson, M. R.


Barclay-Harvey, Sir C. M.
Bobbie, W.
Henderson, J. (Ardwick)


Barrie, Sir C. C.
Dorman-Smith, Major Sir R. H.
Henderson, T. (Tradeston)


Beamish, Rear-Admiral T. P. H.
Duckworth, W. R. (Moss Side)
Hepworth, J.


Beauchamp, Sir B. C.
Dugdale, Captain T. L.
Herbert, Major J. A. (Monmouth)


Beaumont, Hon. R. E. B. (Portsm'h)
Duggan, H. J.
Herbert, Capt. Sir S. (Abbey)


Beeechman, N. A.
Duncan, J. A. L.
Higgs, W. F.


Bens, Rt. Hon. W. W.
Dunease, Lord
Holdsworth, H.


Bird, Sir R. B.
Ede, J. C.
Holmes, J. S.


Bossom, A. C.
Edge, Sir W.
Hopkinson, A.


Bower, Comdr. R. T.
Edmondson, Major Sir J.
Horsbrugh, Florence


Boyce, H. Leslie
Edwards, Sir C. (Bedwellty)
Hudson, Capt. A. U. M. (Hack., N.)


Braithwaite, Major A. N.
Ellis, Sir G.
Hudson, Rt. Hon. R. S. (Southport)


Brass, Sir W.
Elliston, Capt. G. S.
Hunter, T.


Briscoe, Capt. R. G.
Emrys-Evans, P. V.
Hutchinson, C. C.


Broad, F. A.
Errington, E.
Inskip, Rt. Hon. Sir T. W. H.


Brown, C. (Mansfield)
Erskine-Hill, A. G.
Jenkins, A. (Pontypool)


Brown, Col. D. C. (Hexham)
Evans, D. O. (Cardigan)
Jenkins, Sir W. (Neath)


Browne, A. C. (Belfast, W.)
Everard, W. L.
John, W.


Bull, B. B.
Fildes, Sir H.
Jones, Sir H. Haydn (Merloneth)


Burke, W. A.
Fletcher, Lt.-Comdr. R. T. H.
Jones, L. (Swansea W.)


Butcher, H. W.
Fremantle, Sir F. E.
Kerr, H. W. (Oldham)


Campbell, Sir E. T.
Furness, S. N.
Kerr, J. Graham (Scottish Univs.)


Carver, Major W. H.
Fyfe, D. P. M.
Lamb, Sir J. Q.


Cary, R. A.
George, Major G. Lloyd (Pembroke)
Latham, Sir P.


Christie, J. A.
George, Megan Lloyd (Anglesey)
Lathan, G.


Churchill, Rt. Hon. Winston S.
Gledhill, G.
Law, R. K. (Hull, S.W.)


Clarke, Colonel R. S. (E. Grinstead)
Gower, Sir R. V.
Leech, Sir J. W.


Cobb, Captain E. C. (Preston)
Gridley, Sir A. B.
Levy, T.


Colfox, Major W. P.
Griffith, F. Kingsley (M'ddl'sbro, W.)
Liddall, W. S.


Colman, N. C. D.
Grimston, R. V.
Lindsay, K. M.


Colville, Rt. Hon. John
Guest, Lieut.-Colonel H. (Drake)
Llewellin, Colonel J. J.


Conant, Captain R. J. E.
Guest, Hon. I. (Brecon and Radnor)
Lyons, A. M.


Cook, Sir T. R. A. M. (Norfolk N.)
Gunston, Capt. Sir D. W.
Habana, W. (Huddersfield)




McCorquodale, M. S.
Ramsbotham, H.
Spens, W. P.


MacDonald, Rt. Hon. M. (Ross)
Ramsden, Sir E.
Stanley, Rt. Hon. Lord (Fylde)


McKie, J. H.
Rankin, Sir R.
Stanley, Rt. Hon. Oliver (W'm'I'd)


Maitland, A.
Rathbone, J. R. (Bodmin)
Stokes, R. R.


Margesson, Capt. Rt. Hon. H. D. R.
Reed, A. C. (Exeter)
Strauss, H. G. (Norwich)


Marsden, Commander A.
Reed, Sir H. S. (Aylesbury)
Stuart, Hon. J. (Moray and Nairn)


Marshall, F.
Reid, W. Allan (Derby)
Tate, Mavis C.


Mather, G.
Ramer, J. R.
Thorneycroft, G. E. P.


Maxwell, Hon. S. A.
Rickards, G. W. (Skipton)
Tinker, J. J.


Mayhew, Lt.-Col. J.
Ridley, G.
Titchfield, Marquess of


Mellor, Sir J. S. P. (Tamworth)
Robinson, W. A. (St. Helens)
Tufnell, Lieut.-Commander R. L.


Mills, Major J. D. (New Forest)
Ropner, Colonel L.
Walkden, A. G.


Morris-Jones, Sir Henry
Ross Taylor, W. (Woodbridge)
Walker-Smith, Sir J.


Morrison, G. A. (Scottish Univ's.)
Rowlands, G.
Wallace, Capt. Rt. Hon. Euan


Morrison, R. C. (Tottenham, N.)
Royds, Admiral Sir P. M. R.
Ward, Lieut.-Col. Sir A. L. (Hull)


Muirhead, Lt.-Col. A. J.
Ruggles.Brise, Colonel Sir E. A.
Ward, Irene M. B. (Wallsend)


Munro, P.
Russell, Sir Alexander
Warrender, Sir V.


Neven-Spence, Major B. H. H.
Russell, R. J. (Eddisbury)
Waterhouse, Captain C.


Noel-Baker, P. J.
Russell, S. H. M. (Darwen)
Watt, Major G. S. Harvie


O'Connor, Sir Terence J.
Salt, E. W.
Wells, Sir Sydney


Palmer, G. E. H.
Sanderson, Sir F. B.
Westwood, J.


Parker, J.
Scott, Lord William
White, H. Graham


Parkinson, J. A.
Seely, Sir H. M.
Wilkinson, Ellen


Pcake, O.
Shepperson, Sir E. W.
Williams, E. J. (Ogmore)


Peat, C. U.
Simon, Rt. Hon. Sir J. A.
Windsor, W. (Hull, C.)


Pethick-Lawrence, Rt. Hon. F. W.
Simpson, F. B.
Wise, A. R.


Pickthorn, K. W. M.
Sinclair, Rt. Hon. Sir A. (C'thn's)
Woods, G. S. (Finsbury)


Porritt, R. W.
Sinclair, Col. T. (Queen's U. B'If'st)
Wragg, H.


Price, M. P.
Smith, Bracewell (Dulwich)



Procter, Major H. A.
Smith, E. (Stoke)
TELLERS FOR THE NOES.—


Radford, E. A.
Smith, Sir R. W. (Aberdeen)
Captain Hope and Lieut.-Colonel


Raikes, H. V. A. M.
Somervell, Rt. Hon. Sir Donald
Kerr.


Ramsay, Captain A. H. M.
Southby, Commander Sir A. R J.



Lords Amendments considered, and agreed to.

11.28 p.m.

Mr. Pethick-Lawrence: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
I do so with the object of asking the Chancellor of the Exchequer, how far he proposes to go on this Bill to-night? I would point out that we have just spent an hour and a half in the discussion of one of these new Clauses. There are still on the Paper a number of new Clauses and Amendments to Schedules, some of which, at any rate, I understand, it is intended to call. My hon. Friends on this side have been very quiet during the discussion on the last two or three new Clauses put forward from the Government benches, not wishing to interfere with the domestic quarrels of the Government supporters, but the patience of my hon. Friends is not inexhaustible, and if the remaining new Clauses are to be discussed at the same length as the last one, then I am afraid it will not be found possible to complete the Committee stage to-night, and when daylight comes again we shall still be engaged on these new Clauses.

11.30 p.m.

Sir J. Simon: I agree that some time has been taken in the last discussions, and I acknowledge the very good example that has been set by some hon. Gentlemen on both sides of the Committee. I hope now that we may make more rapid

progress. I do not think there will be any extended debates on such remaining Amendments as are to be dealt with. It will be unfortunate if we do not get the Committee stage to-night because we have a great deal of business to deal with, and I think we can do it with co-operation. May I ask at least that we should try to do it?

Mr. Pethick-Lawrence: It is now half-past Eleven, and if we can get through the remaining Amendments by midnight we are prepared to do that; but if there is any idea of going on into the small hours, the proceedings will have to be adjourned. On the understanding that we get through the business by midnight I will withdraw my Motion.

Sir J. Simon: I cannot guarantee that we shall finish all the remaining Amendments in half an hour, but I do not think we should be late. Let us go on and see what we can do.

11.32 p.m.

Mr. Alan Herbert: I should like to support the Motion. I have on the Paper a new Clause which is bound to be called, and I am grateful for that advantage. Last year there were five days for the Committee stage of the Finance Bill, but this year only four. When I hear my right hon. Friend, to whose patience I pay tribute, say that he expects to get through the remainder of the Amendments in a


short time, because, apparently, they are not very important, I am bound to take some slight exception because my new Clause is one to which many people attach great importance, and I do not think it right that it should be squeezed in at the last moment.

11.33 p.m.

Mr. Ede: It is unfair to expect us to sit until the early hours of the morning, because that is what it means if we go beyond 12 o'clock. Most Members on this side find their last trains going about the same time as mine, at 12.16, and, frankly, after then I am prepared to sit until four or five in the morning when the trains start running again. The alternative is to pay 15s. taxi-fare in order to get home, and I would sooner be here listening to hon. Members opposite and encouraging them when they are flagging in their efforts, and get home in comfort by train in the morning. This side of the Committee has not delayed the proceedings, and it is unfair of the Chancellor to punish us for the activities of his own supporters.

11.34 p.m.

Sir J. Simon: Let us see whether we can make an arrangement. The entertainment we shall be glad to have from my hon. Friend the Member for Oxford University (Mr. A. Herbert) had better be postponed to a more suitable hour on another day. I hope, however, that we shall be able to deal with the new Clause which is about to be called, which is a small matter in which there is no difference of opinion, and the one, which is more important, in the name of my hon. and gallant Friend the Member for Clitheroe (Sir W. Brass). There we can stop.

Motion, by leave, withdrawn.

NEW CLAUSE.—(Refund of land tax.)

A person who has paid land tax from which, by virtue of Section twelve of the Finance Act, 1898, as amended by the Finance Acts, 1920 and 1927, he might have claimed an exemption or abatement, shall be entitled to repayment of the amount overpaid, provided that the certificate of income mentioned in that section shall have been produced to the collector within twelve months after the expiration of the year of assessment.—[Mr. Keeling.]

Brought up, and read the First time.

11.35 p.m.

Mr. Keeling: I beg to move, "That the Clause be read a Second time."
I shall be very brief, not only because the hour is late and the subject of the Clause is not a very exhilarating one, but also because the Clause almost explains itself. It provides that a person who has paid Land Tax in error shall be able to recover his money, just as a person who has paid Income Tax in error can recover it.
As the Committee are aware, a landowner whose income does not exceed £160 a year is exempt from Land Tax, and one with an income between £160 and £400 is liable for the tax at only half rate. There is, however, absolutely no provision for the repayment of any of the tax paid in error. I am well aware that payments in error are not very common, because for the purposes of exemption it is the income of the previous year that is taken into account, and therefore a landowner can normally claim exemption before he makes his payment. But hard cases do occur, and I submit that as income Tax paid in error can be recovered the same principle ought to apply to Land Tax, especially as the people chiefly concerned are farmers, who are not always very expert bookkeepers.
Land Tax is normally collected from the occupier, and he may be a tenant who, after paying the tax, deducts the amount from the rent and sends the receipt for the tax to the landlord. In that case the landlord, if he is entitled to an abatement, may find himself with a receipt for an irrecoverable amount. I have here more than one case, supplied to me by the National Farmers' Union, in which that has recently happened. In another recent case Land Tax at the full rate was demanded, though the landlord was only liable at half rate. While his claim to abatement was under investigation by the inspector of taxes the collector sent in a peremptory demand for payment at full rate, threatening distraint. Under this threat the landlord paid the amount in full, thinking, in his ignorance, that if he established his claim he could recover what he had paid in excess. He found that under the law he could not. I could give other instances to the Committee, and I will send them to my right hon. Friend if he wishes to have them. I submit that the present law loads the scales of justice, however slightly, against the taxpayer and in favour of the Exchequer, and I suggest that it ought to be amended.

11.37 p.m.

Sir J. Simon: The new Clause which my hon. Friend has moved deals with quite a minor point, which arises very seldom. I have looked into it rather closely, and in view of the fact that the Land Tax Act makes no provision for the recovery of tax when once it has been paid, as in the hard case which my hon. Friend quoted as an illustration, probably everyone will agree that we ought to see whether such a position cannot be rectified. I could not accept the words of the new Clause in their present form, but if my hon. Friend will agree, I will see before the Report stage whether it is not possible to draft a Clause which will secure what is here aimed at, because I think it is not quite fair that there should be no case in which relief can possibly be obtained.

Mr. Keeling: I am very grateful to my right hon. Friend, and I beg to ask leave to withdraw the Clause.
Motion and Clause, by leave, withdrawn.

>NEW CLAUSE.—(Amendment as respects income from investments and other property in certain cases.)

Paragraph 7 of the Fourth Schedule to the Finance Act, 1937 (which provides for the determination of income received from investments and other property to be included in the profits in the case of certain businesses) shall have effect, in respect of any accounting period beginning after the thirty-first day of March, nineteen hundred and thirty-eight, and in respect of such part of any accounting period as falls after that date, as if the following proviso were inserted at the end of sub-paragraph (a) of that paragraph—
Provided that in the case of the assurance business of a corporate body (other than life assurance business, capital redemption business, or annuity business) where the net premium revenue for any accounting period does not exceed the value at the end of that period of the investments and other property of the corporate body, there shall be included in the profits for that period in respect of income received from such investments and other property, as determined under the foregoing provisions of this paragraph, such a sum only as bears to the whole amount of that income the same proportion as such net premium revenue bears to such value."—[Sir W. Brass.]

Brought up, and read the First time.

11.4o p.m.

Captain Sir William Brass: I beg to move, "That the Clause be read a Second time."
I shall be as brief as possible in explaining this rather complicated Clause. What it really means is that insurance companies, who at the present time pay National Defence Contribution on the whole of their reserves, shall pay National Defence Contribution only on 100 per cent. of the premium income. In other words, if the income of an insurance company were £500,000, the Clause assumes that the reserves of the company would be £500,000, on the interest on which the company would pay the National Defence Contribution. I am not a lawyer, neither am I an actuary, but I will try to explain in the simplest way and in the shortest time the case for the insurance companies. The point is not that the insurance companies cannot pay; they are quite willing to do so if it is just and fair, but they consider that they have a grievance. I do not want to blame the Treasury. The real trouble arose last year when an Amendment was moved in the wrong place and was declared out of order. The Debate which we might have had then on the suggestions I am now proposing did not take place, and the Treasury could not answer or consider the suggestions.
The National Defence Contribution was introduced as a temporary tax, and it was laid down that it should be for five years. It was to be made on the trading profits of businesses. It was not intended to be an extra Income Tax but a separate tax, although on Income Tax lines. Certain individuals were exempted from it because they were not expected to pay it in the same way as Income Tax. In its original form, this tax was on increased profits due to Government expenditure on the rearmament programme; that form was dropped, because the incidence of that tax was not fair, or was considered not fair, and as a result, the flat-rate tax was introduced—[Interruption.] Perhaps the hon. Member will go outside if he wants to discuss something, and discuss it there. It is a little more easy to talk without a discussion going on.
I want to give one or two examples. The Imperial Tobacco Company buys its leaf, makes its cigarettes, pays its overhead charges, sells its cigarettes, pays its expenses for advertisements and then makes a profit, which is a trading profit, on which it pays the National Defence Contribution. That company has a


reserve of £10,000,000, which is invested and produces an interest on which the contribution is not charged. The Shell Transport Company does the same sort of thing; they also have a reserve of £10,000,000, on the interest on which National Defence Contribution is not charged. That position is quite right, because the National Defence Contribution was intended as a tax on increased profits. It was expected that, as the result of the Government's expenditure on rearmament, there would be increased prosperity in the country and these companies would increase their profits, and it was felt that they should make, out of their trade profits, a contribution towards the rearmament programme. Insurance companies are in a different position, and do different business. They do different kinds of business. Their life assurance business is more or less an investment business, and, as far as life and redemption business are concerned, the companies have no objection to the way in which they are taxed at the present time for National Defence Contribution. The Prudential, which is the biggest of these companies, has, as reserves, invested assets of £330,000,000, 98½ per cent. of which relates to life business. The Pearl has £80,000,000 invested, of which £70,000,000 is life, and the Legal and General £39,000,000, of which all is life except £3,000,000.
The investments of these big insurance companies are already, for the most part, liable to National Defence Contribution. But other insurance companies do fire, accident and general business, including motor business, employer's liability business, workmen's compensation, and so on; and there are also those which do marine business. I think I am right in saying that all these kinds of business are really trading business. The insurance companies in these cases sell risks, and Lord Sumner's view was that they should he treated as trading businesses. They collect their premiums, pay their overhead charges and expenses, and pay their claims, the difference being their profit. That is their trading profit, and that is what ought to be subject to National Defence Contribution, which of course is paid at the present time. But beyond that they ought to have some reserve.
Some people think that an insurance company should be treated as an ordinary

industrial company, and that all its reserves should be treated in exactly the same way as those of an ordinary business; but in my view insurance companies should have some reserves as a sort of stock-in-trade, and we suggest here that the reserve in the case of insurance companies should be roc) per cent. of the premium income. That means that, if a company has a premium income of £1,000,000, it would have behind it a reserve of £1,000,000, on the interest on which National Defence Contribution would be charged. Expenses and overhead charges absorb about 35 per cent. of the premium income, leaving 65 per cent. to meet claims. These claims usually account for about 55 per cent., leaving something like 10 per cent. as profit. The premiums do not all come in at the same time of the year, and there must be some reserve to meet claims as they come in during the year.
What is suggested is that this reserve of zoo per cent. of the premium income should be for that purpose. First of all the reserves have to cover unexpired risks. There are certain unexpired risks that come in for it is estimated that that requires about 40 per cent. of the reserve that I am suggesting. In addition there are claims which have been made but have not been satisfied. That would account for another 35 per cent. We have added to that very generously I think, because 75 per cent. is ample to cover any risks that might be encountered, another 25 per cent. for contingencies. I am told—I cannot say this is accurate because it is difficult to calculate—that it will cost the Exchequer approximately £200,000. We must remember that these are very old companies. Some go back to 1710. They have been building up reserves for many years. How can it be contended that the National Defence Contribution can in any way be attached to the income from the old reserves of the companies? It is not a question of the companies not wanting to pay. It is a question of what is fair and what is not. If they are expected to pay National Defence Contribution on all their reserves, so ought all other companies. Courtalds, which have £15,000,000, and Shell Transport, which has £10,000,000, also ought to pay on their reserves, and it is not fair or right that insurance companies, apart from the amount I have suggested,


should be made subject to a temporary tax intended to be paid out of increased profits supposed to accrue as the result of the rearmament programme.

11.55 p.m.

Sir J. Simon: I will do my best to state my view briefly. The National Defence Contribution is a tax upon profits of trade and business. That is the nature of the arrangement. It is not, generally speaking, a tax upon the earnings of investments. Indeed, a tax on the earnings of investments is excluded, generally speaking. Earlier in the day I had occasion to point out that investment income of co-operative societies does not attract any tax under this head. Broadly, the National Defence Contribution is a tax on the profits of business, and not upon investment income. But there are certain kinds of enterprise—perhaps a bank is the most obvious case—where really the making of investments and of profits from investments is the very business carried on. It would be absurd to say you were taxing the profits of business and then to refuse to tax the earnings of a bank's investments. The same is true of investment companies and, with certain adjustments, of life insurance companies. The life insurance company, generally speaking, receives premiums, invests them, keeps those investments for a number of years, and then pays out. In those cases we have to make an exception, because their real business is the making of investments. I have always taken the view that when you come to fire or accident insurance you are approaching a case which is betwixt and between. I was glad to hear my hon. and gallant Friend say he did not share the view, which I have heard advanced by the companies, that investment had nothing to do with their business. That is an absurd claim. Of course, they must hold investments or they cannot carry on their business. When that argument has been advanced I have always, on behalf of the Treasury, resisted it. But I think there is a great deal more to be said for this view, that when you come to consider fire or accident insurance it is rather a middle case. When any one of us takes out a fire policy it usually runs only for 12 months. You may change your company at the end of 12 months if you like. It would be quite wrong to say that investment

has nothing to do with their business, but I am convinced, after detailed inquiry, that they are not in quite the same position as a bank or a life insurance company, where you may take it that the whole of the investments they may make are connected with the carrying on of their business. The fire and accident companies really have accumulated investments which are not necessary for the carrying on of their business.
But I am not at all satisfied that my hon. and gallant Friend in this proposal has drawn the line at the right place. I think myself that there ought to be a larger contribution from investment income before you can say that you have got this thing fair as between different kinds of enterprises. But if my hon. and gallant Friend has followed what I have said—and I think it will appeal to the good sense of the Committee—he will, I am sure, take my assurance that I appreciate the difficulty and will consider the matter with a view to putting up a proposal on the Report stage. I shall be prepared then, to deal with it along the lines which I have suggested. I think it must be agreed that adequate provision ought to be made to get National Defence Contribution from the investment income of these fire insurance and accident insurance companies, but at the same time I can see that their position is not the same as that of the banks or the life insurance companies.
It is right to say, in conclusion, that this matter would have been dealt with last year had it not been for the incident to which my hon. and gallant Friend has referred. As a matter of fact, the proposal then made appeared in the wrong place in the Amendments and was never discussed at all. I believe it should now be possible to achieve the object, which I am sure the Committee would all like to see achieved, of dealign with this matter fairly as between these different classes of companies. I am not prepared, however, to accept this new Clause. To do so would, I think, be giving more than I ought to give. I believe that I can find a figure which would be regarded by reasonable and sensible people as a fair settlement of the matter, and in the circumstances I suggest that my hon. and gallant Friend might be prepared to withdraw his proposal.

Sir W. Brass: May I thank my right hon. Friend for the explanation which


he has given to the Committee? He has quite definitely admitted the principle of this proposal.

Mr. Ellis Smith: Yes, and it is a disgraceful bit of business—with the means test still on.

Sir W. Brass: I agree with my right lion. Friend that it is now largely a question of amount, and I would only point out that the insurance companies have gone as far as they possibly could in this matter. I think, however, that on the question of amount the method suggested by my right hon. Friend is the right one and in the circumstances I shall ask leave to withdraw the proposed new Clause.
Motion and Clause, by leave, withdrawn.

Ordered, "That the Chairman do report Progress, and ask leave to sit again."—[Captain Waterhouse.]

Committee report Progress; to sit again To-morrow.

STREET PLAYGROUNDS BILL.

The remaining Orders were read, and postponed.

It being after Half-past Eleven of the Clock upon Tuesday evening, Mr. SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.

Adjourned at Eight Minutes after Twelve o'Clock.